Coinbase’s latest quarterly report has led S&P Global Ratings to decrease its long-term issuer credit score to BB from BB+ with a adverse outlook.

The score company said Aug. 11 that “weak earnings” and competitive strain on the crypto trade have weakened its protection ratios and “that cyclical variations for Coinbase have increased beyond our previous expectations due to market share erosion and a higher risk of margin compression.”

S&P Global famous that Coinbase’s poor second quarter reviews might be traced to growing uncertainties within the crypto market and rising competitors. As a consequence, Coinbase’s buying and selling quantity for the second quarter reportedly declined by 30% whereas general buying and selling quantity for exchanges declined by solely 3%.

In addition, competitive risk has risen within the crypto trade sector and Coinbase’s market share fell in 2022, S&P Global famous.

The score company mentioned:

“The negative outlook reflects uncertainties about the duration of the crypto market downturn and the company’s ability to operate efficiently by managing operating expenses prudently.”

The score company additionally said that the continued investigation of the trade by the SEC additional compounds uncertainties affecting Coinbase’s development projections.

“Regulatory headwinds have increased for Coinbase with recent disclosure about the SEC’s launch of securities fraud charges against a former employee and, more recently, with respect to investigations into its staking programs and the classification of certain listed assets.”

Challenging instances for Coinbase

Coinbase has been battling challenges regarding its declining market share and relentless investigation by the US Securities and Exchange Commission (SEC).

On August 9, Coinbase recorded the largest loss ever in its second quarter report. It recorded a internet lack of $1.10 billion whereas belongings held on the trade declined to $96 million. With solely $217 million recorded in buying and selling quantity for the quarter, its buying and selling quantity declined by 30% when in comparison with first quarter knowledge of $309 million.

The SEC is presently investigating the trade for itemizing unregistered securities in addition to providing high-growth staking and yield-generating merchandise.

To add to their authorized battles, two New-York primarily based regulation companies have filed a lawsuit claiming that Coinbase deliberately misled the general public by failing to explicitly disclose its compliance coverage and enterprise actions because it pertains to prospects’ belongings.

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