SEC alt-coin clampdown could put 30% of Coinbase revenue at risk, Mizuho says (COIN)
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Even before the Securities Exchange Commission on Tuesday sued Coinbase (NASDAQ:COIN), Mizuho Securities USA estimated that more than 30% of the crypto exchange’s revenue could be at risk.
The suit against Coinbase (COIN), alleging that it offered unregistered crypto asset securities, came a day after the U.S. securities regulator filed a lawsuit against Binance, the world’s largest cryptocurrency exchange.
“SEC’s complaint vs. Binance may turn alt-coins into ‘halt-coins,'” Mizuho analyst Dan Dolev wrote in a note to clients. With a number of alt-coins listed in the Binance complaint, “our interpretation is that this language is a potential sign that the SEC views alt-coins (i.e., non-Bitcoin or Ethereum tokens) as securities,” he said.
In the Coinbase (COIN) suit, the SEC specifically named a number of popular alt-coins, including solana (SOL-USD) and cardano (ADA-USD), that are offered and sold as investment contracts, “and thus as securities.”
Others named are: polygon (MATIC-USD), FileCoin (FIL-USD), The Sandbox (SAND-USD), Axie Infinity (AXS-USD), chiliz (CHZ-USD), flow (FLOW-USD), internet computer (ICP-USD), near (NEAR-USD), voxels (VOX-USD), dash (DASH-USD), and nexo (NEXO-USD). In addition, the SEC said the crypto assets that it considers securities aren’t limited to that list.
“In the event that alt-coins require registration, the cumbersome process and risk of application denial for tokens may inhibit COIN’s ability to generate transaction revenue,” Dolev said.
He noted that alt-coins accounted for ~45% of Coinbase’s (COIN) trading volumes and ~46% of transaction revenue, or ~22% of total company revenue.
Dolev reiterated the firm’s Underperform rating on the stock with a price target of $27. Coinbase (COIN) stock dropped 14% in Tuesday midday trading to $50.74 at 1:01 PM ET.
In alt-coins, cardano (ADA-USD) fell 0.3%, solana (SOL-USD) +0.4%, polygon (MATIC-USD) -4.1%, filecoin (FIL-USD) +3.3%, the sandbox (SAND-USD) -2.5%.