Coinbase staking pause in four states illustrates regulatory risk: Berenberg

Quick Take

  • Equity analysts at Berenberg Capital Markets say that Coinbase’s suspension of staking in four states could open the door to scrutiny over its so-called Earn product.

Equity analysts at Berenberg Capital Markets say that Coinbase's suspension of staking in four states illustrates the stock's regulatory risk and could open the door to scrutiny over its so-called Earn product, the firm said in a note Monday. 

Coinbase said retail clients in four states will no longer to be able to add new assets to its staking product while numerous legal proceedings carry on. 

Ten states — including Alabama, California, and New Jersey — filed actions against the exchange to halt its staking program within their jurisdictions on the heels of the Securities and Exchange Commission's lawsuit against the firm in June.

Berenberg said this news reflects the regulatory risk around Coinbase's stock that may have been forgotten after a federal judge issued a split decision in the SEC's case against Ripple Labs last week.

"We believe this news served as a reminder to investors who may have viewed COIN’s risk profile as significantly improved after last week’s court ruling on Ripple Labs and the XRP cryptocurrency that the company’s challenges on the U.S. regulatory front remain significant while appearing far from being resolved," analysts at the firm said. 


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"We believe Coinbase Earn, the securitized product through which COIN offers staking rewards to retail customers, appears particularly vulnerable to being defined as a security within the context of the judge’s ruling." the firm added. 

Coinbase rallied more than 20% on Thursday alongside the broader crypto market after a judge ruled that Ripple Lab's sales of XRP on exchanges did not violate securities laws. 

Private investment firm WedBush said in a report last week that it increased its price target on the company to $110.

"We are specifically encouraged by the suggestion that XRP sale on the public exchanges did not involve securities," the firm wrote.

Needbush also increased its price target to $120 from $70 following the decision.

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Frank Chaparro is Host of The Scoop podcast and Director of Special Projects. He also writes a biweekly newsletter. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. For inquiries or tips, email [email protected].