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Rating agency S&P Global downgrades Coinbase's credit rating

 


Influential rating agency S&P Global has downgraded the credit rating of the leading American crypto exchange from BB+ to BB after the trading platform released its latest business results.


As the rating agency confirms , the downgrade is due to the fact that Coinbase's performance was significantly weaker in the second quarter of 2022. The increased competitive pressure within the industry, which has caused Coinbase to lose market share this year, is also cited as one of the causes.


"The negative rating also reflects the uncertainty surrounding the duration of the current downtrend in the crypto market and the company's ability to adjust its business operations accordingly."

In that regard, S&P Global notes that the total value of assets invested on Coinbase fell to $96 billion in the most recent quarter, down 63% from the previous quarter. This is due on the one hand to the lower price and on the other hand to capital outflows from institutional investors.


The plan by the large market leader Binance to completely abolish trading fees could also mean that the crypto exchange has to reconsider its own fees, which, however, account for a large part of the revenue:


"We have come to the conclusion that the comparatively high trading fees on Coinbase, combined with the aggressive fee reductions of the competition, puts the risk that Coinbase has to cut corners in the retail banking business (which accounts for almost 80% of total revenue)."

Pressure from the supervisory authorities makes matters worse, because the US Securities and Exchange Commission (SEC) recently launched two new investigations against the platform, which could possibly have further negative consequences.


Overall, despite the downgrade, S&P Global believes that Coinbase still poses “a very low risk overall” because the platform’s biggest problems are primarily due to the current global economic situation and the general crypto crisis.

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