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Moody’s Investors Service revised its outlook for Coinbase Global (Nasdaq: Coin) to minus from stable after the Securities and Exchange Commission sued the cryptocurrency exchange for allegedly operating as an unregistered broker.
The revised outlook reflects the “uncertain size” of the lawsuit from the impact on Coinbase (COINBusiness model and cash flow.
Moody’s also affirmed Coinbase (COIN) Family’s B2 and B1 Guaranteed Unsecured Notes ratings. “This reflects a healthy liquidity position, recent improvements in cash flow generation resulting from prudent expense management, and because the SEC fee relates only to certain Coinbase (COIN) products, and excludes its leading exchange-traded products.”
The lawsuit is likely to force Coinbase (COIN) to give up “illicit” winnings, interest, and penalties. It can also negatively impact certain product offerings, including their rewards business.
Moody’s expect Coinbase (COIN) to continue to focus on managing expenses, which helped offset a slowdown in transaction revenue.