For several months, the most popular cryptocurrency exchange, like the rest of the crypto industry, has been mired in a crash that has swallowed up more than $2 trillion.
This cryptocurrency price crash turned into a liquidity crisis affecting a large number of prominent lenders like Voyager Digital, Celsius Network, Babel Finance and BlockFi.
The first two filed for Chapter 11 bankruptcy proceedings, the third suspended fund withdrawals — thus preventing its customers from accessing their money — while the fourth was bailed out by the crypto exchange FTX.com. FTX was founded by the billionaire Sam Bankman-Fried, who has become the new savior of the sector.
For exchanges like Coinbase, the crisis translates into a drop in trading volumes because many investors, especially retail investors, have liquidated their positions in a hurry and are on the sidelines.
A Big Win in Italy
“There’s nobody that’s willing to step in and buy it,” said Mike Boroughs, head of portfolio management at Fortis Digital. “So when you think about there were all these people coming into crypto, that was a lot of demand to buy, over the last few years, and now a lot of those people have permanently left. They’ve lost all their money. They’re not ever coming back.
“And there’s a lot of people that were maybe on the fence, that were like, ‘maybe I’ll dip my toe into crypto’ that are now like, ‘never mind, I’m not going to do that.’ So, the demand has gone away at the same time as the supply has increased.”
To cope with this so-called crypto winter, Coinbase is reducing its costs. The platform in mid-June decided to lay off 1,100 employees, or 18% of its workforce; froze hiring and went so far as to rescind certain job offers made to candidates. Coinbase shares have lost 79% this year. At last check on July 18 they were trading 14% higher above $61.
But recent news might buoy investors. Coinbase has obtained approval from the Italian authorities to continue serving customers in the country. This green light comes when the company hopes that international expansion, particularly in Europe, could enable it to offset the decline in trade volumes in the U.S.
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“Today, we’re able to announce a key milestone in that journey: securing approval from Italian regulators to provide ongoing crypto services to its residents,” the company said in a blog post on July 18.
The Italian regulator, the Organismo Agenti e Mediatori, which oversees financial agents and credit brokers in Italy and implements anti-money laundering controls, has determined that the firm has met the necessary criteria to obtain the approval.
Applications in Other European Countries
“Gaining this regulatory approval is a testament to our close collaboration and positive working relationship with the Italian financial regulators,” Nana Murugesan, Coinbase’s vice president of international and business development, said in the blog post.
“As we continue to grow across Europe and other regions, maintaining our strong regulatory relationships will ensure that we will continue to bring to market the products that our customers want, through the most trusted and secure platform in the cryptoeconomy.”
Last month, European Union officials secured an agreement on what is likely to be the first major regulatory framework for the cryptocurrency industry.
This landmark law of the EU, known as Markets in Crypto-Assets, will impose strict regulations on crypto players. For example, Crypto companies will need licenses and customer safeguards to issue and sell digital tokens in the bloc.
“We are in the process of strengthening our presence across Europe and have registrations or license applications in progress in several major markets in compliance with local regulations,” Coinbase said.
“In each of these markets, our goal is to grow our customer base by launching the Coinbase suite of retail, institutional, and ecosystem products.”
The firm serves customers in almost 40 European countries through hubs in Ireland, the UK, and Germany.