Coinbase benefitting from 'hostile regulatory environment': Bitwise

In the wake of the Securities and Exchange Commission issuing Robinhood Crypto a Wells Notice, Bitwise CIO Matt Hougan took to X to argue that a "hostile regulatory environment" is benefitting Coinbase, the top cryptocurrency exchange in the U.S.

"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," Hougan said in a post. 

While Coinbase has long been at loggerheads with the SEC, last week it reported that it had generated $1.6 billion in revenue during the first quarter of 2024 amid rising transaction fees collected from both institutional and consumer clients.

On Monday, Robinhood Crypto, a competitor of Coinbase, said SEC staff has recommended an enforcement action against it, alleging securities violations. Robinhood Crypto supports trading for over a dozen cryptocurrencies including bitcoin, ether, dogecoin and shiba inu. 

Last month, decentralized crypto exchange Uniswap and Ethereum development studio Consensys both also received a Wells Notice from the SEC.

The SEC sued Coinbase last year for allegedly operating as an unregistered exchange, broker and clearing agency. The regulator has also taken issue with Coinbase's staking and wallet services.

Hougan also argued that Coinbase's ability earn solid returns in turn helping them to raise money and further their business interests. "What's impressive is that they are using this opportunity to both raise cash (now $7.1 billion) and massively diversified their business (see the growth in USDC, Base, int'l futures)," he said.

Bitwise is the issuer of one of severa spot bitcoin ETFs trading since January.