Coinbase jumped 10.7% to $192.59, peaked at $192.92 with 10.47 million shares changing hands after the SEC issued its five-year tokenization exemption. The rally stemmed from the regulatory move, not a crypto price surge.
The SEC issued a five-year “Innovation Exemption” that lets regulated Tokenized Securities Venues trade tokenized versions of U.S.-listed stocks through permissioned automated market makers and liquidity pools. This exemption is expected to benefit Coinbase, the largest regulated crypto exchange in the U.S.
Coinbase’s stock had fallen hard after the Senate killed the CLARITY Act on a 49-50 procedural vote. However, the SEC order reversed that damage within 72 hours, showing that the regulatory path for digital assets can run through the agency even when Congress stalls.
Coinbase’s Regulatory Outlook Improves
The SEC order is the single most important development for Coinbase this quarter. The order grants temporary, conditional relief to Tokenized Securities Venues from the definition of an exchange under the Securities Exchange Act of 1934. Coinbase is positioned to benefit on three fronts: its Ethereum layer-2 network, Base, its custody, brokerage, and market-making operations, and its share in the economics of USDC.
The exemption is temporary and will need permanent rulemaking to survive past five years. Volume caps constrain early activity, and issuers can block their stocks from being tokenized. Despite these limitations, the market is pricing in optionality with a clear timeline, and Coinbase’s stock has gained 10.7% as a result.
Coinbase’s CEO, Brian Armstrong, had previewed an alternative path to regulation on September 10, saying he saw crypto regulation advancing regardless of the CLARITY Act. The SEC order vindicated that strategy within 48 hours of the vote, showing that the current administration’s regulators can deliver meaningful reform without Congress.
The regulatory outlook for Coinbase is now less binary, with a series of agency actions that can unlock new business lines. However, there is a downside to regulation through the agency, as orders can be modified or reversed by a future SEC, and temporary exemptions lack the permanence of statute.
Coinbase’s Business Model Evolves
Coinbase’s business model is evolving, with a growing share of revenue coming from subscription and services. In the second quarter, subscription and services revenue reached $555.1 million, representing 48% of net revenue. This segment is driven by stablecoin revenue, particularly USDC, and is seen as a durable buffer independent of trading volumes.
The growth outlook for stablecoins is large, with Armstrong predicting a tenfold expansion of the stablecoin market by 2030. The SEC’s tokenized-stock exemption adds another use case, since tokenized equities will settle in stablecoins. Coinbase’s stablecoin revenue rises with interest rates, as the reserves backing USDC are held in short-term Treasuries.
Coinbase’s second-quarter report showed a net loss of $359.5 million, but the company’s market share is rising, and its prediction markets revenue more than doubled. The third-quarter report, due in late October, will show whether the recovery in crypto prices and the growth in new products have been enough to restore profitability.
The company’s stock is now trading at $192.59, with a session high of $192.92. The volume profile confirms institutional participation, with 10.47 million shares traded by late morning, already above the 10.24 million daily average.
Coinbase’s Ethereum layer-2 network, Base, is among the largest regulated-adjacent networks in the U.S. and is expected to benefit from the exemption. They also run custody, brokerage, and market-making operations that could qualify as or support a Tokenized Securities Venue.
The guidance for the third quarter projects subscription and services revenue of $500 million to $580 million.
Leave a Reply