Moody’s Drops Coinbase Outlook From Stable to Negative Over Medium Term

Moody's Investors Service, one of the top global credit rating agencies, changed its outlook on Coinbase (COIN) from stable to negative.

The credit rating agency's note provides an opinion on the potential direction of a stock's
rating over a medium-term period, typically 12 to 18 months. The outlook can be positive, stable, or negative.

Yesterday’s note comes amid a fresh lawsuit from the SEC against the exchange for allegedly operating as a non-licensed broker and trading in unregistered securities.

COIN was last trading at $54.90, according to Nasdaq data, 7.5% lower than its price before the lawsuit.

Moody's analysts noted that the "uncertain magnitude" of the SEC's lawsuit had prompted them to downgrade its outlook for Coinbase.

The potential regulatory actions that can be brought against Coinbase include "interest and penalties" and a dramatic change to its product offering and business activities due to securities law application on specific tokens and staking services, said Moody’s

Bitcoin, Ethereum rake in most for Coinbase

Nevertheless, Moody's maintained its 2022 credit rating of Coinbase, citing its "healthy liquidity position," cost cuts at the company, and because the SEC's charges are limited to certain tokens and "exclude its leading traded products."

Credit rating is a letter-based grading system that reflects the agency's assessment of the creditworthiness and default risk associated with a particular debt issuer.

Coinbase's current rating of "corporate family B2, senior debt B1" represents a moderate level of credit risk.

Moody’s also wrote that the leading breadwinners for Coinbase—Bitcoin (BTC) and Ethereum (ETH) trading and income through interest—were not mentioned in the SEC's lawsuit.

Ethereum and Bitcoin trading accounted for 33% of Coinbase's revenue last year since March 2023.

At the same time, interest from stablecoins and fiat accounted for 31% of its total revenue in Q1 2023.