The U.S.-based cryptocurrency exchange Coinbase’s overseas campaign appeared to be gathering momentum in light of its news this week that it had obtained a crucial regulatory license in Singapore.
Although the company’s efforts to obtain regulatory license to conduct business in other regions are generally regarded as wise decisions, some analysts also perceive Coinbase’s recent gains as more symbolic than substantive, at least for the time being.
According to Berenberg Capital Markets analyst Mark Palmer, “it makes sense for Coinbase to lean into international initiatives given the still-heightened regulatory risk in the U.S., but we think it remains an open question whether the company will be able to execute what appears to be a very difficult pivot.” The markets it is aiming for are quite competitive, so it would need to gain a lot of traction to make up for the net revenue it would lose access to in the U.S.
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With its new license in Singapore, Coinbase should be able to provide institutional and retail customers in the area with a greater range of digital payment token services.
The certification comes after a slew of previous announcements related to Coinbase’s international expansion, or “Go Broad, Go Deep.” In addition to receiving authorization to market perpetual futures to non-American retail customers last week, the business also obtained Bank of Spain registration as a cryptocurrency exchange and custodial wallet provider.
The company has been working hard to create a presence in overseas regions while Coinbase fights with U.S. regulators, which is by far its biggest market. According to what it has stated, its approach entails concentrating on 24 nations, including G20 participants like Brazil as well as Hong Kong, Switzerland, and the United Arab Emirates.
Revenue threats continue
We estimate that more than 36% of the net revenue that Coinbase generated during the second quarter may be at risk due to regulatory actions that have been initiated or, in the case of stablecoins, could be on the horizon. “The reality is that the vast majority of Coinbase’s net revenue is still generated in the U.S.,” continued Palmer.
John Todaro, senior research analyst at Needham & Company, voiced skepticism about how successful Coinbase’s overseas efforts will turn out despite supporting them in light of the current market situation.
“You have to look abroad when [trade] volumes are this low. There should be some operational leverage from it as it doesn’t require a lot more spending, he told The Block. Despite this, the volume picture is muted globally, and it is too early, in our opinion, to determine how much income ultimately flows from these new countries.
Expanding opportunities overseas
According to several industry analysts, Coinbase’s desire to diversify and readiness to remain adaptable in the face of a constantly changing regulatory environment should pay off. And if Binance, the biggest cryptocurrency exchange in the world, keeps losing market share, competitor exchanges will inevitably have a chance to expand.
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Rayne Steinberg, CEO of crypto hedge fund Arca, said: “At the end of the day, you will need regulatory approval if you want to develop a global brand. “Going too far down one route in this area is highly perilous since it is so brand-new and evolving so quickly. This also holds true for regulatory frameworks. Even those that seem nice can swiftly turn hostile. If you have the resources, it is better to have strategies in multiple areas.
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Although the U.S. legal environment lags behind other places, particularly Europe, adoption of blockchain technology and cryptocurrencies is still moving in the right direction, according to Avivah Litan, a senior analyst for the blockchain industry at Gartner. Trustworthy businesses and exchanges will undoubtedly profit.
Litan continues, “Coinbase is exactly on the money by concentrating more on non-U.S. regions, where authorities are almost borderline dysfunctional in their attitude. It’s encouraging to see Coinbase approved in Singapore because that country has always been at the top of its class in this regard.”
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