Coinbase earnings reports carry weight because the U.S. cryptocurrency exchange commands material market share in a budding portion of the digital economy. Additionally, it's an active startup investor and a key data point in determining the current health of the crypto market. Naturally, TechCrunch was all over its recently released financial data, pulling out a few key takeaways from the mix.
However, in the wake of Coinbase's Q2 2022 earnings cycle, its regulatory disclosures contained in recent filings with the U.S. Securities and Exchange Commission have garnered attention, so this morning we're digging in a bit more.
Regulatory risk is always something to consider when we discuss financial technology companies. Any business dealing with money in motion has to abide by a large and complicated set of rules that have been written over time in an effort to help a nation's financial markets operate smoothly, with minimal fraud and a lack of erratic volatility.
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However, because the technology market can advance faster than government regulations, companies operating at the forefront of changes to financial technology can wind up in a regulatory gray area. This creates a gap between what the government has sorted out and what the market is actually up to. That's where we can spot regulatory risk, and that zone of uncertainty contains billions and billions of dollars of economic activity.