Coinbase, the biggest cryptocurrency exchange in America, has amassed about $4B worth in cash as a reservoir to prepare for shrunk retail crypto trading volumes as well as the heavier operating costs caused by regulatory hurdles. The organization reportedly anticipates using the cash to meet the costs triggered by several factors, such as adopting the latest regulations imposed by the legislature of the United States. Alesia Haas, the CEO of Coinbase, informed Wall Street Journal that the firm had not been triggered by any danger to itself or the industry. Rather, it was doing this to get prepared for the catastrophe being in the good times.
Alesia stated that the company intends to ensure that it maintains the collected cash reserves to keep a continuation in the investments and product growth services to undergo the crypto winter. Crypto winter denotes a long-lasting bear market. The reason behind this situation is the regulatory tempest to shortly inflict the crypto industry as a result of the infrastructure-based bill passed by the Senate of the United States during the last week being slackly worded to take validators, miners, and the platforms of decentralized finance in the definition of broker for imposing a tax on them.
The regulatory framework may require the previously mentioned entities to report IRS about their user activity. Many representatives of the crypto world are lobbying to bring change in the severe regulations. Although the bill is expected to get amended by the house yet, the crypto community is afraid that a comprehensive amount of the trading volume of the cryptocurrency could get dried up as a consequence if that bill is sanctioned into law without any amendment.
Binance, one of the prominent competitors of Coinbase, also started collecting a similar crisis managing fund named SAFU (Secure Asset Fund for Users); however, its purpose is to compensate the customers regarding security breaches as well as other issues concerning cybersecurity.
Another expenditure that can be tackled by the fund of Coinbase is the roll-outs of the latest products. Currently, they are heavily dealt with by the transaction fees, which may cost in a loss of stock. To cope with this condition, the firm may target its attention toward introducing the latest financial services that would expectedly diversify the means of revenue for the company.