Pending enforcement action may put over a third of Coinbase’s revenues at risk.

US regulator, the Securities and Exchange Commission (SEC), has sent a Wells Notice to Coinbase Global Inc (NASDAQ: COIN), a cryptocurrency exchange listed on Nasdaq.

Analysts have interpreted this as an “ominous sign” and a possible indication of an impending enforcement action.

Coinbase’s altcoin trading and staking products are currently being reviewed, and if the SEC deems that they are unregistered securities, they could be at risk.

Brian Armstrong, the CEO of Coinbase, has expressed his dissatisfaction with the prospect of regulatory enforcement action. He highlighted that two years ago, the SEC thoroughly examined their business and approved Coinbase to go public. Armstrong also emphasized that their S1 included a clear explanation of their asset listing process and made 57 references to staking.

According to Jefferies analysts, up to 35% of Coinbase’s revenue is potentially at risk, depending on the SEC’s actions. While bitcoin trading would not be impacted, as the SEC has already determined that it may be a commodity rather than a security, altcoins make up 25% of net revenue and 46% of transaction revenue in the most recent quarter. Staking accounted for approximately 10% of revenue in Q4 and 12% for the entire fiscal year.

Coinbase’s Chief Legal Officer, Paul Grewal, argues that the SEC has not been cooperative in recent discussions on token listings. Grewal stated that they asked the SEC for reasonable cryptocurrency regulations for Americans, but instead received legal threats. He called the Wells Notice a “disappointing development.”

The SEC has taken recent enforcement actions against other cryptocurrency companies, including a $45 million fine against crypto lender Nexo Capital and a $30 million fine against crypto exchange Kraken for failing to register its crypto staking service.

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