With Coinbase’s announcement this week that it secured a key regulatory license in Singapore, the U.S.-based crypto exchange’s international push appears to be gaining steam.
But while the company’s drive to secure regulatory approval to operate in international markets is widely viewed as an intelligent move, some analysts simultaneously view Coinbase’s recent gains as somewhat symbolic rather than substantive, at least for the time being.
“While it makes sense for Coinbase to lean into international initiatives given the still-heightened regulatory risk in the U.S., we think it remains an open question whether the company will be able to execute what appears to be a very difficult pivot,” Berenberg Capital Markets analyst Mark Palmer told The Block. “There is a lot of competition in the markets it is targeting, and it would have to gain a great deal of traction to make up for the net revenue to which it could lose access in the U.S.”
Coinbase’s new license in Singapore is expected to allow the company to offer a wider range of Digital Payment Token services to both retail and institutional customers in the region.
The announcement follows a string of other announcements coming as a result of Coinbase’s push abroad, a strategy it calls “Go Broad, Go Deep.” Last week, the company not only gained approval to offer non-U.S. retail users perpetual futures, it also secured registration as a cryptocurrency exchange and custodian wallet provider with the Bank of Spain.
With Coinbase’s battle with U.S. regulators ongoing — by far its biggest market — the company has been working harder to establish a footprint in international markets. It has said its strategy involves focusing on 24 countries, including G20 members like Brazil, plus Hong Kong, Switzerland, and the United Arab Emirates.
Revenue risks remain
“The reality is that vast majority of Coinbase’s net revenue is still generated in the U.S., and we estimate that more than 36% of the net revenue that the company 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,” added Palmer.
Given market conditions, Needham & Company Senior Research Analyst John Todaro is supportive of Coinbase’s international efforts, but also expressed skepticism about how lucrative the strategy will prove to be.
“With [trading] volumes being this tepid, you have to look abroad. It does not require much additional spend too, so there should be some operational leverage from it,” he told The Block. “That being said, it is too early in our view to see how much revenue ultimately comes from these new markets and globally the volume picture looks muted still.”
Growing opportunity abroad
For some industry experts, the fact that Coinbase is keen to diversify and displaying a willingness to remain nimble amid an ever-evolving regulatory landscape should pay dividends. And if Binance, the world’s largest cryptocurrency exchange, continues to lose market share, naturally rival exchanges will have an opportunity to grow.
“At the end of the day, you will need regulatory approval if you want to create a global brand so might as well start now,” said Rayne Steinberg, CEO at crypto hedge fund Arca. “This is a space that is so new and changing so fast, that to go too far down one path is very risky. This applies to regulatory regimes as well. Ones that appear to be friendly can still change rather quickly. Better to have approaches in several if you have the resources.”
While the regulatory situation in the U.S. lags behind other regions, especially Europe, adoption of blockchain and cryptocurrency continues to trend in the right direction, argued Gartner Senior Blockchain Industry Analyst Avivah Litan. Companies and exchanges people can trust will clearly benefit.
“Coinbase is right on the mark by focusing more on non-U.S. markets, where regulators are borderline dysfunctional in their approach,” she told The Block. “Singapore has always been at the front of the class in this regard and it’s good to see Coinbase licensed there.”
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