If the regulation problem continues, Coinbase may experience a decline in profits due to the recent announcement that Kraken would stop offering its cryptocurrency staking service.
In the long run, the recent actions taken by the Securities and Exchange Commission aimed at numerous participants in the cryptocurrency business may have a negative impact on large companies such as Coinbase.
If the regulatory action spreads to other participants, the SEC’s restrictions on Kraken’s staking program may certainly have an impact on its revenue streams. Or did the SEC seek to warn the cryptocurrency companies? The agency’s chair, Gary Gensler, recently stated that strict compliance with regulations would ensure that crypto businesses survive.
The other big cryptocurrency exchange, Binance, is also concerned as it tries to secure a banking partner to back its US Dollar operations. Because of this, Binance has temporarily suspended withdrawals and transactions in US dollars.
Crypto Staking – Coinbase Revenue
The financial results for Coinbase’s quarter ending in December 2022 are expected to be released on Tuesday, February 21, 2023. The FTX collapse, which caused the market to crash and left all exchanges, including Coinbase, with a significant decline in transaction volume, damaged the quarter. Although Coinbase’s revenue is largely derived from user trading, the current crypto winter has reduced that amount.
As a result, exchanges frequently concentrate on maximizing revenue from other sources, such as cryptocurrency staking. If regulatory worries intensify, this could result in Coinbase losing part of these revenues.
Coinbase charges a commission based on the rewards users receive from staking. For instance, the commission on Cardano (ADA) and Solana (SOL) is 35%, compared to 25% on Ethereum (ETH).
Staking, custody, and interest income companies generated $178.9 million in revenue for Coinbase in the most recent quarter. The SEC’s new proposed requirements will be stiffer for companies that secure assets for fund managers in addition to the problems with staking.