Coinbase Upgraded to Outperform as U.S. Crypto Regulations Improve

Coinbase, a prominent cryptocurrency exchange, has been initiated with an "outperform" rating by Bernstein, a leading brokerage firm. This move comes as the regulatory environment for the crypto industry in the U.S. is expected to improve, positioning Coinbase to benefit significantly from these favorable conditions.

Bernstein's report highlights that the improving regulatory landscape will likely attract more competition for Coinbase from various financial institutions, including fintech companies, brokers, and banks. However, the analysts, led by Gautam Chhugani, believe that a strong bull market and the increasing dominance of the U.S. in the onshore crypto market will more than compensate for any market share and pricing pressures.

The report underscores the potential for a more favorable regulatory environment under the new administration, with the President's promise to make the U.S. the "crypto capital of the world." This regulatory clarity is seen as a significant tailwind for digital assets, potentially driving growth and innovation in the sector.

The Securities and Exchange Commission (SEC) has taken steps to enhance regulatory oversight by forming a new crypto task force led by Commissioner Hester Peirce. This task force is tasked with drafting new regulations for the industry, which could provide a more structured and transparent framework for crypto operations.

Coinbase has strategically diversified its offerings beyond traditional trading, establishing a strong presence in U.S. dollar stablecoins and crypto yield services, such as staking. This diversification is expected to contribute to a 31% compound annual growth rate (CAGR) in non-trading revenues between 2024 and 2026, providing a robust balance to the cyclical nature of trading revenues.

Additionally, Coinbase has recently secured Financial Intelligence Unit (FIU) registration, which paves the way for its return to the Indian market. This development is part of Coinbase's broader strategy to expand its global footprint and tap into new markets, further solidifying its position as a leading player in the crypto industry.