Bitwise CIO: SEC’s “hostile regulatory environment” benefits Coinbase

Bitwise
Chief
Investment
Officer
Matt
Hougan
believes
that
recent
regulatory
scrutiny
could
play
a
role
in
Coinbase’s
favor
and
benefit
the
company
in
facing
the
SEC.

The
U.S.

SEC
has
recently
issued
a

Wells
notice
to

Robinhood
Crypto,
indicating
a
potential
enforcement
action
for
securities
violations.
This
regulatory
scrutiny
is
playing
a
significant
role
in
shaping
the
competitive
landscape
among
crypto
exchanges,
particularly
benefiting
Coinbase,
according
to
Hougan.

In
a
post
on
the
social
media
platform
X,
Hougan
argued
that
the
stringent
regulatory
environment
inadvertently
creates
a
competitive
advantage
for

Coinbase
by
establishing
an
artificial
moat
around
its
operations.
This
advantage
allows
Coinbase
to
maintain
high
profit
margins
and
achieve
substantial
earnings
in
the
short
term.

The
hostile
regulatory
environment
is
creating
an
artificial “moat”
for
Coinbase’s
business,
helping
sustain
extremely
high
margins
and
allowing
them
to
over-earn
in
the
short-term.

What’s
impressive
is
that
they
are
using
this
opportunity
to
both
raise
cash
(now
$7.1
billion)…

—
Matt
Hougan
(@Matt_Hougan)

May
6,
2024

Coinbase,
despite
its
ongoing
disputes
with
the
SEC,

reported
a
revenue
of
$1.6
billion
for
the
first
quarter
of
2024,
fueled
by
increased
transaction
fees
from
institutional
and
consumer
clients.
The
company’s
financial
success
comes
amidst
broader
regulatory
actions,
including
last
year’s

lawsuit
against
Coinbase
by
the
SEC,
which
accused
the
company
of
operating
as
an
unregistered
exchange,
broker,
and
clearing
agency.
The
regulator
has
also
criticized
Coinbase’s
staking
and
wallet
services.

Robinhood
Crypto,
a
direct
competitor,
facilitates
trading
for
various

cryptocurrencies,
including
Bitcoin
(BTC),
Ether
(ETH),
Dogecoin
(DOGE),
and
Shiba
Inu
(SHIB).
Other
entities
have
encountered
similar
regulatory
challenges
in
the
crypto
space,
such
as
decentralized
crypto
exchange

Uniswap
and
Ethereum
development
studio

Consensys,
which
received
Wells
notices
from
the
SEC
last
month.

Hougan
highlighted
that
despite
regulatory
hurdles,
Coinbase
is
using
this
period
to
bolster
its
finances
and
diversify
its
operations.

“What’s
impressive
is
that
they
are
using
this
opportunity
to
both
raise
cash
and
massively
diversified
their
business,”
he
said.

Bitwise,
the
company
Hougan
represents,
has
also
been
active
in
the
crypto
market,
being
the
custodian
for
eight
of
nine
spot

Bitcoin
ETFs
trading
since
January
2024.