In brief:
- SEC Chairperson said this month that he intends to regulate cryptocurrency trading and lending platforms to the maximum extent possible.
- The company stress-tests its balance sheet to ensure that it has sufficient funding to prepare for tighter regulatory regimes, potential cyberattacks, or reduced potential transactions.
Coinbase Global has built a $4 billion cash stockpile. The company apparently is benefitting from a trading frenzy and preparing for closer regulatory scrutiny.
According to Chief Financial Officer Alesia Haas, Coinbase has assimilated cash to survive many business risks in the crypto industry. According to her, the company stress-tests its balance sheet to ensure that it has sufficient funding to prepare for tighter regulatory regimes, potential cyberattacks, or reduced potential transactions. She also said she maintains additional cash as insurance against risks that have not yet been identified.
“We want to ensure that we maintain those cash reserves so that we can continue to invest and continue to grow our products and services in the event that we go into a crypto winter,” Ms. Haas said.
The recent surge in transactions has boosted Coinbase’s profits. The company generated $ 1.61 billion in revenue in the second quarter. Monthly retail trading users increased about six-fold to 8.8 million over the same period. The company has approximately 9,000 institutional customers.
Coinbase is paying close attention to Gensler’s public statements regarding crypto-regulations. Ms. Haas said, “We do believe that regulation can be an enabler and not a burden,”.
As Coinbase adds new users, a key focus for the company will be on investing in new products and services in areas such as consumer financial services, said Moshe Katri, an analyst with Wedbush Securities Inc. The company’s recent results show it can generate cash from its operations, Mr. Katri said. “This is literally a cash machine,” he said.
