S&P Global Drops Coinbase Debt Rating Over Crypto Market Downturn, Doubts Over Company's Ability To 'Operate Efficiently'

S&P Global has lowered its credit rating of Coinbase Global Inc COIN citing a “negative” outlook for the cryptocurrency exchange.

What Happened: S&P Global lowered its long-term issuer credit rating and unsecured debt ratings on Coinbase to ‘BB’ from ‘BB+’ on Thursday.

The ratings agency said it had revised its assessment of the crypto exchange’s financial risk after Coinbase reported weak earnings in the second quarter.

See Also: HOW DOES COINBASE MAKE MONEY?

“The negative outlook reflects uncertainties about the duration of the crypto market downturn and the company's ability to operate efficiently by managing operating expenses prudently,” stated S&P Global in a note.

“It also reflects the potential for further market share deterioration amid a challenging competitive landscape as well as heightened regulatory risk.”

S&P Global pointed to the 30% decline in Coinbase’s trading volume in Q2, while overall crypto spot trading volume declined only 3% across all other venues, as a sign that “competitive risk” had increased for the U.S.-based exchange.

Noting that rival crypto exchange Binance’s move to introduce zero trading fees for Bitcoin BTC/USD even as the asset’s price slumped, further intensified the risk of fee compression in Coinbase’s retail channel — which accounts for 80% of its total revenues.

“Regulatory headwinds have increased for Coinbase with recent disclosure about the SEC's launch of securities fraud charges against a former employee and, more recently, with respect to investigations into its staking programs and the classification of certain listed assets,” wrote S&P Global.

See Also: Coinbase Faces SEC Probe Over Token Listings, Staking and Yield Products

Price Action: Coinbase shares were trading 0.70% higher after hours, as per data from Benzinga Pro.