Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.
Michael Nagle | Bloomberg | Getty Images
Coinbase CEO Brian Armstrong is unhappy with JPMorgan Chase’s decision to block crypto-related transactions at its U.K. digital banking subsidiary, Chase UK.
Chase UK earlier this week put out a notice to customers saying it will no longer allow its customers to purchase cryptocurrencies using its debit cards or through bank transfers, citing concerns over the risk of fraud to users from digital tokens.
The bank, which has operated as a standalone entity in the U.K. since 2021, said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”
“Once in a while we see a bank in the world that decides they want to de-platform this whole industry,” Armstrong said in an interview with CNBC’s “Squawk Box” on Thursday.
“I don’t think that’s OK. I don’t think that’s the rule of things in our society. I think the government should decide what is allowed and what’s not.”
The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud.
Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.
In its note to customers Tuesday, Chase UK said that it was blocking the use of crypto by its customers due to concerns over a rise in fraud.
Data from Action Fraud, the U.K. fraud reporting agency, shows that U.K. consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.
Bitcoin, ether, XRP and other cryptocurrencies are not legal currency.
Originally created as an alternative, online form of money meant to bypass the need for bank accounts and other financial middlemen, they have increasingly been embraced by mainstream financial institutions such as PayPal, Visa, and Mastercard.
The people transacting in bitcoin and other digital currencies don’t disclose their real identity, making it harder for banks to trace them for suspicious payments versus digital fiat currency transactions.
Nevertheless, crypto’s proponents say that the industry has matured a great deal in the wake of the collapse of FTX and numerous other scandals. They say it can become part of everyday payments and trading in a way that is legitimate.
For its part, the U.K. has been working to develop legislation that would regulate retail trading in crypto assets.
The Financial Services and Markets Bill is one example of legislation that already includes some provisions on cryptocurrency. That specific law aims to bring crypto assets into the regulatory fold. But it is not a comprehensive law addressing crypto through tailored laws.
Jurisdictions around the world from Dubai to Singapore have been trying to position themselves as crypto-friendly places to encourage firms to set up shop there.
The U.S., meanwhile, has taken a hard line on cryptocurrency firms with its regulators stepping up enforcement action against companies.
Armstrong suggested that the U.K. government should take heed of Chase UK’s move to ban crypto payments — though he acknowledged the country’s ambition to become a “Web3 and crypto hub.”
“The government in the U.K. through [U.K. PM] Rishi Sunak and Andrew Griffith the city minister in London have it made clear they want to make the U.K. a Web3 and crypto hub,” Armstrong said.
“They are trying to attract businesses there. I was disappointed to see Chase UK’s stance on that. I hope that was a misunderstanding that will be clarified in the coming weeks.”
Cathie Wood, CEO of Ark Invest, speaks during an interview on CNBC on the floor of the New York Stock Exchange (NYSE) in New York City, February 27, 2023.
Brendan McDermid | Reuters
ARK Invest CEO Cathie Wood said she did not participate in Arm‘s blockbuster initial public offering last week because she finds the British chip designer was overvalued relative to its competitive position.
The initial buzz has since fizzled, with the stock suffering successive daily declines to end the Tuesday trade session at $55.17.
Speaking on CNBC’s “Squawk Box Europe” on Wednesday, Wood said the recent frenzy around AI-exposed companies was justified and that “innovation is undervalued given the enormous opportunities that we see ahead, catalyzed very importantly by artificial intelligence.”
“As far as Arm, I think there might be a little bit too much emphasis on AI when it comes to Arm and maybe not enough focus on the competitive dynamics out there,” she added.
Arm CEO Rene Haas and executives cheer, as Softbank’s Arm, chip design firm, holds an initial public offering (IPO) at Nasdaq Market site in New York, U.S., September 14, 2023.
Brendan Mcdermid | Reuters
“So we did not participate in that IPO, and we also compare it to the stocks in our portfolios. Arm came out, we think, from a valuation point of view on the high side, and we see within our portfolios much lower priced names with much more exposure to AI.”
After taking a beating during the recent cycle of aggressive interest rate hikes from the U.S. Federal Reserve, the ARK ETF resurged this year, as investors flocked to stocks with AI exposure. Wood said that the anticipation of interest rates peaking would further this trend.
“The appetite for innovation is stirring here, and I think one of the reasons is because many investors and analysts are starting to look over the interest rate hike moves we’ve seen, record breaking in the last year or so, and to the other side,” she explained.
With inflation coming down across major economies and with central banks expected to begin unwinding their aggressive monetary policy tightening over the next year, Wood suggested the coming period “should be a very good environment for innovation and global megatrend strategies.”
ARK Invest on Wednesday acquired British thematic ETF issuer Rize ETF for £5.25 million ($6.5 million), marking the company’s first venture into the European passive investment market.
Wood said that Europe has not had access to actually invest in the company’s U.S.-based ETFs until now, despite accounting for around 25% of demand for the company’s research since ARK’s inception in 2014.
“The cost of technology, especially with artificial intelligence now, is collapsing, and therefore it’s going to be much easier to build and scale tech companies anywhere in the world. This is no longer just the purview of Silicon Valley,” Wood said. “We are very open-minded about technologies flourishing throughout the world, including Europe.”
Jensen Huang, chief executive officer of Nvidia Corp.
David Paul Morris | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Markets popped U.S. stocks had a great Tuesday, with the S&P 500 and Nasdaq Composite advancing more than 1% each. Meanwhile, Treasury yields dipped, relieving the pressure on stocks. Asia-markets climbed Wednesday. Australia’s S&P/ASX 200 rose around 1.4%, leading gains in the region, after the country’s consumer price index for July softened to 4.9% from June’s 5.4%.
Stricter regulations for regional banks All U.S. banks with at least $100 billion in assets — which includes regional banks — will have to issue long-term debt, according to plans by U.S. banking regulators. The debt will protect depositors in the event of a bank failure. But raising debt at potentially higher prices will squeeze margins for mid-sized banks.
Nvidia’s record close Nvidia shares popped 4.16% Tuesday to close at a record of $487.84. Investors cheered the chipmaker’s partnership with Google, which gives users of Google Cloud greater access to technology powered by Nvidia’s H100 GPUs. Nvidia’s risen 234% this year, making it the best performer in the S&P 500.
China’s big on Costco too Some parts of China’s economy are booming despite a general slowdown. The average daily foot traffic at Costco was around 7,000 people — two times that of the U.S. — according to David and Susan Schwartz, co-authors of the forthcoming book “The Joy of Costco: A Treasure Hunt from A to Z.” Apart from the wholesale retailer, the premium market is enjoying success as well.
Bitcoin ETF on the way? Crypto asset manager Grayscale prevailed in its lawsuit against the Securities and Exchange Commission, which previously denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The ruling paves the way for other companies that want to create bitcoin ETFs, like BlackRock and Fidelity. Bitcoin jumped 6% and shares of Coinbase surged 15% on the news.
[PRO] Year-end high for S&P? The S&P 500 will be close to touching 5,000 by the end of the year, Morgan Stanley Investment Management’s Andrew Slimmon believes. Here’s why Slimmon thinks stocks will rise despite struggling in August — and the three stocks to buy to ride on the wave.
A sudden flurry of positive business news — and not-so-good economic data — is giving stocks a last hurrah as they try to overcome the doldrums of August.
Nvidia’s announcement of its partnership with Google gave the stock the jolt that even its out-of-this-world earnings report couldn’t. It seemed investors were waiting for signs that Nvidia’s sales could be sustained in the long-term before piling back in — and pile back in they did.
Meanwhile, cryptocurrency got a boost from the U.S. Court of Appeals for the D.C. Circuit, which ruled against the SEC’s denial of Grayscale’s bitcoin ETF. “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products.
On the other side of the coin, economic data released Tuesday doesn’t look so hot. The Conference Board’s Consumer Confidence Index came in at 106.1 for August, markedly lower than the forecast of 116. “Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, chief economist at The Conference Board.
Consumers could also be concerned about the cooling labor market. Job openings in July fell from 9.5 million a month prior to 8.8 million, the lowest level since March 2021. But that’s still around 1.5 openings per unemployed person, so the figure isn’t really cool, but a nice Goldilocks temperature.
Markets found strength on the news. The S&P 500 advanced 1.45%, its best day since June 2 and its first three-day gain for August. The Dow Jones Industrial Average climbed 0.85%. The Nasdaq Composite jumped 1.74%, thanks to a bounce in tech stocks. All three indexes closed above their 50-day moving average — the first time since Aug. 14 for the S&P.
If the personal consumptions expenditure index and the jobs report for August come in softer than expected, there’s a chance stocks can sustain this positive momentum into September.
The U.S. Court of Appeals for the D.C. Circuit has paved the way for bitcoin exchange-traded funds.
On Tuesday, the court sided with Grayscale in a lawsuit against the Securities and Exchange Commission which had denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The decision could impact other companies that want to create bitcoin ETFs, like BlackRock and Fidelity.
A spot bitcoin ETF would be traded through a traditional stock exchange, although the bitcoin would be held by a brokerage, and would allow investors to gain exposure to the world’s biggest cryptocurrency without having to own the coin themselves. Many crypto bulls believe that approval of a spot bitcoin ETF will lead to more mainstream institutional adoption.
Bitcoin, ether and other major cap crypto coins surged on the news, and Coinbase, which is listed as the custodian partner in multiple spot bitcoin ETF applications, was up more than 14% on Tuesday.
“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful.”
Grayscale Investments, which manages the world’s biggest crypto fund, initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its flagship bitcoin fund, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about possible market manipulation and investor protections.
“We are reviewing the court’s decision to determine next steps,” the SEC said in a statement.
A spokeswoman for Grayscale called Tuesday’s ruling “a monumental step forward for American investors, the Bitcoin ecosystem, and all those who have been advocating for Bitcoin exposure through the added protections of the ETF wrapper.”
“The Grayscale team and our legal advisors are actively reviewing the details outlined in the Court’s opinion and will be pursuing next steps with the SEC. We will share more information as soon as practicable,” continued the written statement.
One expert says the SEC’s enforcement action is basically dead in the water.
“The bottom line is that while the SEC can try to take the case to the Supreme Court, they have no other avenue to deny Grayscale’s application,” said Renato Mariotti, a former federal prosecutor in the Securities and Commodities Fraud Section of the United States Attorney’s Office — and now a trial partner in Chicago with Bryan Cave Leighton Paisner.
“If the SEC changed their rationale for denying their application, it would appear even more arbitrary. The SEC already put their best argument forward, and the Court of Appeals rejected it,” continued Mariotti.
Castle Island Venture’s Nic Carter agrees, adding that while the SEC can go back and try to deny the application on different grounds, the best next step is for the agency “to accept the decision as a way to ‘save face’ and allow the spot ETF in a way that shows they disagree with the decision but respect the court’s ruling.”
CoinRoutes CEO, Dave Weisberger, tells CNBC it could even net SEC Chairman Gary Gensler a political win — a spot bitcoin ETF would grant the regulator some oversight of the bitcoin spot market even though the token is not considered a security.
GBTC, which has $16 billion in assets under management as of Tuesday, was the first crypto product investors could trade in their brokerage accounts to get exposure to bitcoin. It was launched in 2013, well before the approval of bitcoin ETFs in Canada or bitcoin futures ETFs in the U.S. Grayscale charges a 2% annual fee to investors, making it a cash cow for parent company Digital Currency Group, led by Barry Silbert.
“It virtually guarantees they will approve BlackRock and Fidelity,” said Dave Weisberger, CEO of CoinRoutes, a platform that provides algorithmic trading and consolidated market data products for digital assets across multiple exchanges and liquidity providers. “Grayscale may need to refile, but they will almost certainly be approved as well.”
Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate. But investor sentiment was buoyed in June when BlackRock, the world’s largest asset manager with some $9 trillion in assets under management, put in an application. The firm has had all but one of its previous 575 ETF applications accepted.
Jensen Huang, CEO of Nvidia, shows the Nvidia Volta GPU computing platform at his keynote address at CES in Las Vegas, Jan. 7, 2018.
Rick Wilking | Reuters
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Markets popped U.S. stocks had a great Tuesday, with the S&P 500 and Nasdaq Composite advancing more than 1% each. Meanwhile, Treasury yields dipped, relieving the pressure on stocks. The pan-European Stoxx 600 rose 1%, with all sectors and major bourses in positive territory. Shares of Dutch insurance company NN Group jumped 10.15% after posting strong earnings.
Stricter regulations for regional banks All U.S. banks with at least $100 billion in assets — which includes regional banks — will have to issue long-term debt, according to plans by U.S. banking regulators. The debt will protect depositors in the event of a bank failure. But raising debt at potentially higher prices will squeeze margins for mid-sized banks.
Nvidia’s record close Nvidia shares popped 4.16% Tuesday to close at a record of $487.84. Investors cheered the chipmaker’s partnership with Google, which gives users of Google Cloud greater access to technology powered by Nvidia’s H100 GPUs. Nvidia’s risen 234% this year, making it the best performer in the S&P 500.
Bitcoin ETF on the way? Crypto asset manager Grayscale prevailed in its lawsuit against the Securities and Exchange Commission, which previously denied the company’s application to convert the Grayscale Bitcoin Trust to an ETF. The ruling paves the way for other companies that want to create bitcoin ETFs, like BlackRock and Fidelity. Bitcoin jumped 6% and shares of Coinbase surged 15% on the news.
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A sudden flurry of positive business news — and not-so-good economic data — is giving stocks a last hurrah as they try to overcome the doldrums of August.
Nvidia’s announcement of its partnership with Google gave the stock the jolt that even its out-of-this-world earnings report couldn’t. It seemed investors were waiting for signs that Nvidia’s sales could be sustained in the long-term before piling back in — and pile back in they did.
Meanwhile, cryptocurrency got a boost from the U.S. Court of Appeals for the D.C. Circuit, which ruled against the SEC’s denial of Grayscale’s bitcoin ETF. “The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said, referring to exchange-traded products.
On the other side of the coin, economic data released Tuesday doesn’t look so hot. The Conference Board’s Consumer Confidence Index came in at 106.1 for August, markedly lower than the forecast of 116. “Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, chief economist at The Conference Board.
Consumers could also be concerned about the cooling labor market. Job openings in July fell from 9.5 million a month prior to 8.8 million, the lowest level since March 2021. But that’s still around 1.5 openings per unemployed person, so the figure isn’t really cool, but a nice Goldilocks temperature.
Markets found strength on the news. The S&P 500 advanced 1.45%, its best day since June 2 and its first three-day gain for August. The Dow Jones Industrial Average climbed 0.85%. The Nasdaq Composite jumped 1.74%, thanks to a bounce in tech stocks. All three indexes closed above their 50-day moving average — the first time since Aug. 14 for the S&P.
If the personal consumptions expenditure index and the jobs report for August come in softer than expected, there’s a chance stocks can sustain this positive momentum into September.
Check out the companies making headlines in midday trading.
Best Buy — Shares popped nearly 6% after the retailer’s fiscal second-quarter earnings beat on both the top and bottom lines. Adjusted earnings per share came in at $1.22, versus the $1.06 expected from analysts polled by Refintiv. Revenue was $9.58 billion, topping the consensus estimate of $9.52 billion. However, Best Buy lowered the top end of its revenue outlook for the year.
Big Lots — The discount retailer surged 26.7% after its earnings report came in better than analysts expected. Big Lots lost $3.24 per share, on an adjusted basis, less than the $4.11 forecasted by analysts surveyed by FactSet. Revenue exceeded the consensus estimate of $1.1 billion, coming in at $1.14 billion.
Coinbase, Marathon Digital, Riot Platforms — Stocks tied to the cryptocurrency industry soared after a court ruled against the Securities and Exchange Commission in a lawsuit about spot bitcoin ETFs. Shares of Coinbase, which is named as a custodial partner in several proposed bitcoin ETFs, jumped 13%. Bitcoin mining stocks also rose, with Marathon Digital surging 24% and Riot Platforms climbing 15%.
3M — Shares gained 2.6% after the company agreed to settle lawsuits regarding potentially defective U.S. military earplugs for $6.01 billion. The deal had grown into the largest mass tort litigation in U.S. history.
Heico — The engine and aircraft part maker retreated 3.1%. Despite beating expectations for revenue in the quarter, the company said its operating margin fell when compared with the same quarter a year ago.
Nvidia — The artificial intelligence stock rallied 4%, part of a broader ascent among technology stocks in Tuesday’s session. Morgan Stanley reiterated its overweight rating on the stock, noting its strong earnings report last week can be a positive signal for the AI supply chain.
PDD Holdings — U.S.-listed shares jumped 17.8%. The Chinese e-commerce company beat Wall Street expectations when reporting second-quarter earnings. It noted a positive shift in consumer sentiment during the quarter.
Oracle — Software giant Oracle climbed 2.9% following an upgrade from UBS to buy from neutral. UBS said the stock could have upside ahead due to tailwinds tied to artificial intelligence.
AT&T, Verizon — The telecommunication giants each added 2.3% on the back of a Citi upgrade to buy. The firm cited stabilization in the wireless environment and said the stocks’ valuations may be over-discounting potential costs tied to mitigating lead-covered cables.
Alphabet, General Motors — Google Cloud and General Motors said Tuesday they’re working together to explore artificial intelligence opportunities across the automaker’s business. Following the announcement, shares of Google Cloud’s parent company Alphabet and General Motors rose 3.5% and 0.6%, respectively, during midday trading.
Catalent — Catalent jumped more than 5% after the biotech company issued a solid revenue outlook and announced a deal with activist investor Elliott Investment Management. For fiscal 2024, Catalent forecasted revenue in the range of $4.30 billion to 4.50 billion, far above the $4.19 billion expected by analysts polled by FactSet. Additionally, Catalent agreed to name four new independent directors to its board, two of whom will be nominated by Elliott. It also agreed to a review of its business and strategy.
Ginkgo Bioworks — The biotechnology company’s stock popped more than 18% after announcing a five-year cloud and AI partnership with Google Cloud. As part of the deal, Ginkgo Bioworks will work to create new large language models for biology and biosecurity uses. Alphabet shares were last up more than 3%.
Rockwell Automation — The industrial stock gained nearly 2% after Wells Fargo upgraded the stock to equal weight from underweight. The Wall Street firm said it’s bullish on Rockwell’s earnings growth potential.
Airbnb — The vacation booking platform climbed 4.8%. Bernstein reiterated its outperform rating and said investors should buy the stock after a recent pullback in share prices.
Palantir – The software stock surged more than 5%. Bank of America reiterated its buy rating on Palantir, calling the company a “key player” in implementing secure AI despite the recent share pullback.
Splunk — Shares of the software company added 1.8% on Tuesday after Jefferies named the company a top pick in a Tuesday note. Jefferies said Splunk is now in position to deliver “mid-teens” increases in annual revenue after a management overhaul that began 18 months ago.
Futu Holdings — The Asian wealth management stock popped 10% following a double-upgrade to buy from underperform by Bank of America. The Wall Street bank said to expect more growth in overseas markets.
NextEra Energy Partners — The energy stock advanced 3.7% on the back of an upgrade from Raymond James to outperform from market perform. Raymond James said investors should buy the dip on the stock.
— CNBC’s Sarah Min, Samantha Subin, Yun Li, Hakyung Kim, Michelle Fox, Pia Singh and Jesse Pound contributed reporting
The price of bitcoin surged Tuesday after the U.S. Court of Appeals for the DC Circuit ruled that the Securities and Exchange Commission was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust into an ETF.
Bitcoin jumped about 6.5% following the ruling to $27,683.82, according to Coin Metrics. The move lifted cryptocurrencies broadly as well as crypto equities higher.
Bitcoin 1-day
Grayscale’s lawsuit against the SEC has been closely watched by investors and other industry participants as a key catalyst that would shake up a market marred by low volatility and liquidity. Earlier this month bitcoin trading volatility fell to its lowest level in more than four years as investors had been waiting on the sidelines for more regulatory clarity on crypto activity – whether through new legislation out of Congress or through the ability to launch a spot bitcoin ETF.
Several bitcoin futures ETFs have already been approved in the U.S.
“The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said in the ruling. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order.”
Many hope Tuesday’s ruling increases the chances that the SEC will approve other bitcoin ETF applications – including that of BlackRock, whose filing in late June drove one of bitcoin’s big rallies this year, as well as Fidelity, WisdomTree, VanEck and Invesco and others. A U.S. bitcoin ETF would provide a way to get exposure to bitcoin without having to hold it, which would invite retail and institutional investors as well as wealth managers into the market.
The ruling also comes as a relief to many crypto market participants who have been frustrated by the SEC, particularly under Chair Gary Gensler, and its insistence on regulating by enforcement. The crypto industry has long sought out clarity in rules businesses can play by to establish and build long-lasting, compliant companies. The U.S. regulatory crackdown on crypto in 2023 — which includes and SEC enforcements and a lawsuit against the biggest U.S. crypto exchange — Coinbase, has been a dark cloud over the market.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.
Funds associated with Cathie Wood’s ARK Investment continued to cull shares of Coinbase Global Inc. and Tesla Inc. on Monday, according to recent trade disclosures.
The ARK Fintech Innovation ETF ARKF, +1.58%
dumped 76,788 Coinbase shares COIN, +0.23%
on the day, while the ARK Innovation ETF ARKK, +2.29%
sold 127,266 and the ARK Next Generation Internet ETF ARKW, +2.23%
sold 44,784 shares.
Coinbase represents 0.78% of the Fintech Innovation ETF, along with 0.15% of the Innovation ETF and 0.30% of the Next Generation Internet ETF. ARK disclosed the transactions and weightings in the daily trade notifications it posts to its website.
Meanwhile, the ARK Innovation ETF shed 38,329 Tesla shares TSLA, +3.20%
on Monday, while the ARK Next Generation Internet ETF sold 6,855. Those shares were worth $13.1 million based on Tesla’s Monday closing level of $290.38. Tesla represents about 0.12% of both funds as they continue to unload shares.
ARK scooped up 455 shares of Meta Platforms Inc. META, +0.57%
within its Next Generation Internet ETF and bought up 3,729 shares within the ARK Innovation ETF. That amounted to $1.3 million worth of stock based on Meta’s $310.62 Monday close.
Two ARK funds bought a combined $790 million in Robinhood Markets Inc.’s stock HOOD, +0.89%,
with the fintech fund scooping up 25,641 shares and the Next Generation Internet ETF buying 37,630 shares. ARK added 4,608 shares of SoFi Technologies Inc. SOFI, +4.41%
to the fintech fund, worth $43,683 based on Monday’s close.
ARK was also active in shares of Twilio Inc. TWLO, -0.63%,
buying 15,702 within the Fintech Innovation ETF, 133,499 within the Innovation ETF and 22,748 within the Next Generation Internet ETF. That amounted to $11.4 million in Twilio’s stock based on Monday’s $66.47 closing price.
Car-sharing service Turo filed its IPO prospectus in January 2022. A month earlier, Reddit said it submitted a draft registration for a public offering. Instacart’s confidential paperwork was filed in May of last year.
None of them have hit the market yet.
Despite a bloated pipeline of companies waiting to go public and a rebound in tech stocks that pushed the Nasdaq up 30% in the first half of 2023, the IPO drought continues. There hasn’t been a notable venture-backed tech initial public offering in the U.S. since December 2021, when software vendor HashiCorp debuted on the Nasdaq.
Across all industries, only 10 companies raised $100 million or more in U.S. initial share sales in the first six months of the year, according to FactSet. During the same stretch in 2021, there were 517 such transactions, highlighted by billion-dollar-plus IPOs from companies including dating site Bumble, online lender Affirm, and software developers UiPath and SentinelOne.
As the second half of 2023 gets underway, investors and bankers aren’t expecting much champagne popping for the rest of the year.
Many once high-flying companies are still hanging onto their old valuations, failing to reconcile with a new reality after a brutal 2022. Additionally, muted economic growth has led businesses and consumers to cut costs and delay software purchases, which is making it particularly difficult for companies to comfortably forecast the next couple of quarters. Wall Street likes predictability.
So if you’re waiting on a splashy debut from design software maker Canva, ticket site StubHub or data management company Databricks, be patient.
“There’s a disconnect between valuations in 2021 and valuations today, and that’s a hard pill to swallow,” said Lise Buyer, founder of IPO consultancy Class V Group in Portola Valley, California. “There will be incremental activity after a period of absolute radio silence but it isn’t like companies are racing to get out the door.”
The public markets tell an uneven story. This year’s rally has brought the Nasdaq to within 15% of its record from late 2021, while an index of cloud stocks is still off by roughly 50%.
Some signs of optimism popped up this month as Mediterranean restaurant chain Cava went public on the New York Stock Exchange. The stock more than doubled on its first day of trading, indicating high demand from retail investors. Buyer noted that institutions were also enthused about the deal.
Last Friday, Israeli beauty and tech company Oddity, which runs the Il Makiage and Spoiled Child brands, filed to go public on the Nasdaq.
That all comes after a big month for secondary offerings. According to data from Goldman Sachs, May was the busiest month for public stock sales since November 2021, driven by a jump in follow-on deals.
While investors are craving new names, they’re much more discerning when it comes to technology than they were at the tail end of the decade-long bull market.
Mega-cap stocks Apple and Nvidia have seen outsized gains this year and are back to trading near all-time highs, boosting the Nasdaq because of their hefty weightings in the index. But the advances are not evenly spread across the industry.
In particular, investors who bet on less mature businesses are still hurting. The companies that held the seven-biggest tech IPOs in the U.S. in 2021 have lost at least 40% of their value since their debut. Coinbase, which went public through a direct listing, is down more than 80%.
That year’s IPO class featured high-growth businesses with even higher cash burn, an equation that worked fine until recession concerns and rising interest rates pushed investors into assets better positioned to withstand an economic slowdown and increased capital costs.
Employees of Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, watch as their listing is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, April 14, 2021.
Shannon Stapleton | Reuters
Bankers and investors tell CNBC that optimism is picking up, but ongoing economic concerns and the valuation overhang from the pre-2022 era set the stage for a quiet second half for tech IPOs.
One added challenge is that fixed income alternatives are back. Following a lengthy stretch of near-zero interest rates, the Federal Reserve this year lifted its target rate to between 5% and 5.25%. Parking money in short-term Treasurys, certificates of deposit and high-yield savings offerings can now generate annual returns of 5% or more.
“Interest rates are not only about the cost of financing, but also getting investors to trade out of 5% risk-free returns,” said Jake Dollarhide, CEO of Longbow Asset Management. “You can make 15%-20% in the stock market but lose 15%-20%.”
Dollarhide, whose firm has invested in milestone tech offerings like Google and Facebook, says IPOs are important. They offer more opportunities for money managers, and they generate profits for the tech ecosystem that help fund the next generation of innovative companies.
But he understands why there’s skepticism about the window reopening. Perhaps the biggest recent bust in tech investing followed the boom in special purpose acquisition companies (SPACs), which brought scores of less mature companies to the public market through reverse mergers.
“It seems the foul odor of failure from the 2021 SPAC craze has spoiled the appetite from investors seeking IPOs,” Dollarhide said. “I think that’s done some harm to the traditional IPO market.”
Private markets have felt the impact. Venture funding slowed dramatically last year from record levels and has stayed relatively suppressed, outside of the red-hot area of artificial intelligence. Companies have been forced to cut staff and close offices in order to preserve cash and right-size their business
Pre-IPO companies like Stripe, Canva and Klarna have taken huge hits to their valuations, either through internal measures or markdowns from outside investors.
Few have been hit as hard as Instacart, which has repeatedly slashed its valuation, from a peak of $39 billion to as low as $10 billion in late 2022. Last year, the company confidentially registered for an IPO, but still hasn’t filed publicly and doesn’t have immediate plans to do so.
Similarly, Reddit said in December 2021 that it had confidentially submitted a draft registration statement to go public. That was before the online ad market took a dive, with Facebook suffering through three straight quarters of declining revenue and Google’s ad sales also slipping.
Now Reddit is in the midst of a business model shift, moving its focus beyond ads and toward generating revenue from third-party developers for the use of its data. But that change sparked a protest this month across a wide swath of Reddit’s most popular communities, leaving the company with plenty to sort through before it can sell itself to the public.
A Reddit spokesperson declined to comment.
Turo was so close to an IPO that it went beyond a confidential filing and published its full S-1 registration statement in January 2022. When stocks sold off, the offering was indefinitely delayed. To avoid withdrawing its filing, the company has to continue updating its quarterly results.
Like Instacart, Turo operates in the sharing economy, a dark spot for investors last year. Airbnb, Uber and DoorDash have all bounced back in 2023, but they’ve also instituted significant job cuts. Turo has gone in the opposite direction, more than doubling its full-time head count to 868 at the end of March from 429 at the time of its original IPO filing in 2021, according to its latest filing. The company reportedly laid off about 30% of its staff in 2020, during the Covid pandemic.
Turo and Instacart could still go public by year-end if market conditions continue to improve, according to sources familiar with the companies who asked not to be named because they weren’t authorized to speak publicly on the matter.
Byron Deeter, a cloud software investor at Bessemer Venture Partners, doesn’t expect any notable activity this year, and says the next crop of companies to debut will most likely wait until after showing their first-quarter results in 2024.
“The companies that were on file or were considering going out a little over a year ago, they’ve pulled, stopped updating, and overwhelmingly have no plans to refile this calendar year,” said Deeter, whose investments include Twilio and HashiCorp. “We’re 10 months from the real activity picking up,” Deeter said, adding that uncertainty around next year’s presidential election could lead to further delays.
In the absence of IPOs, startups have to consider the fate of their employees, many of whom have a large amount of their net worth tied up in their company’s equity, and have been waiting years for a chance to sell some of it.
Stripe addressed the issue in March, announcing that investors would buy $6.5 billion worth of employee shares. The move lowered the payment company’s valuation to about $50 billion from a high of $95 billion. Deeter said many late-stage companies are looking at similar transactions, which typically involve allowing employees to sell around 20% of their vested stock.
He said his inbox fills up daily with brokers trying to “schlep little blocks of shares” from employees at late-stage startups.
“The Stripe problem is real and the general liquidity problem is real,” Deeter said. “Employees are agitating for some path to liquidity. With the public market still pretty closed, they’re asking for alternatives.”
G Squared is one of the venture firms active in buying up employee equity. Larry Aschebrook, the firm’s founder, said about 60% of G Squared’s capital goes to secondary purchases, helping companies provide some level of liquidity to staffers.
Aschebrook said in an interview that transactions started to pick up in the second quarter of last year and continued to increase to the point where “now it’s overwhelming.” Companies and their employees have gotten more realistic about the market reset, so significant chunks of equity can now be purchased for 50% to 70% below valuations from 2021 financing rounds, he said.
Because of nondisclosure agreements, Aschebrook said he couldn’t name any private company shares he’s purchased of late, but he said his firm previously bought pre-IPO secondary stock in Pinterest, Coursera, Spotify and Airbnb.
“Right now there’s a significant need for that release of pressure,” Aschebrook said. “We’re assisting companies with elongating their private lifecycle and solving problems presented by staying private longer.”
Gary Gensler, Chair of the U.S. Securities and Exchange Commission, takes his seat before the start of the Senate Banking, Housing, and Urban Affairs Committee hearing on Oversight of the U.S. Securities and Exchange Commission on Tuesday, Sept. 14, 2021.
Bill Clark | CQ-Roll Call, Inc. | Getty Images
SEC Chair Gary Gensler stepped up his attack on the crypto industry this week, suing Coinbase and Binance for securities violations and casting doubt on the future of token trading.
Crypto investors took the hint. Four of the 10 most valuable coins plunged in value by at least 15% this week, according to CoinMarketCap, a sell-off sparked by the lawsuits and Gensler’s interview with CNBC on Tuesday, in which he said “we don’t need more digital currency.”
In alleging that Coinbase was acting as an unregistered broker and exchange, the Securities and Exchange Commission said at least 13 crypto assets available to the company’s customers were considered “crypto asset securities.” They include Solana’s SOL token, Cardano’s ADA token, Polygon’s MATIC coin and Protocol Labs’ Filecoin token (FIL).
Trading app Robinhood followed on Friday by announcing that, starting June 27, it will no longer support trading of coins from Cardano, Polygon and Solana. The company said “no other coins are affected.” Also on Friday, Crypto.com said it will shut down its U.S. institutional exchange.
“No other coins are affected and your crypto is still safe on Robinhood,” the company said in a post.
Cardano’s coin, the seventh-most valuable cryptocurrency, according to CoinMarketCap, tumbled 20% in the past week. Solana, ranked ninth, dropped 18%. Polygon, ranked 10th, also slid 18%. Filecoin, which is further down the list, dropped 19%. Binance’s BNB token, ranked fourth, fell 16%.
Bitcoin and ethereum, the two most popular cryptocurrencies, were more stable, each declining less than 5%.
Gensler, who was appointed to head the SEC by President Joe Biden in 2021, has spent much of the past year going after crypto firms and exchanges for effectively selling highly speculative and risky securities dressed up as something else.
From high-profile fraud cases involving Sam Bankman-Fried’s FTX and Do Kwon’s Terraform Labs to dozens of charges involving coin offerings and alleged false marketing, Gensler has made the once-burgeoning crypto industry his primary takedown target.
“The investing public has the benefit of U.S. securities laws,” Gensler said in an interview with CNBC’s “Squawk on the Street” on Tuesday. “Crypto should be no different, and these platforms, these intermediaries need to come into compliance.”
Gensler’s TV appearance came after the SEC sued Coinbase and said the company should be “permanently restrained and enjoined” from “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.”
Shares of Coinbase, the only major crypto exchange that’s publicly traded in the U.S., sank 18% this week. Coinbase legal chief Paul Grewal told CNBC in a statement that the SEC’s approach to enforcement without laying out clear rules is “hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance.”
A day earlier, in its lawsuit against Binance, the SEC alleged that the company and founder Changpeng Zhao comingled billions of dollars worth of user funds and sent them to a European company controlled by Zhao.
While Binance claims no official headquarters and does most of its business overseas, the SEC’s complaint cited a senior executive allegedly telling a compliance officer that the company was operating as a “[f—ing] unlicensed securities exchange in the USA bro.”
In a blog post, Binance said it was “disappointed” in the SEC’s suit and said it had “engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.”
Others named in the SEC lawsuit also weighed in after this week’s charges landed.
The Cardano Foundation, which works to advance use of its namesake technology, said in a tweet that it disagrees with the labeling of its ADA coin as a security and “we look forward to the continued engagement with regulators and policymakers to achieve legal clarity and certainty on these matters.”
Protocol Labs, the developer of Filecoin, said in a series of tweets on Thursday that the token is critical to the operation of its distributed storage network. It’s how people buy storage from providers, and Protocol says the cost is much less than what users would pay Amazon Web Services or Google Cloud.
“Filecoin is a cryptocurrency-powered global storage network preserving humanity’s most important information, not a security,” Protocol Labs tweeted.
In its 101-page complaint against Coinbase, the SEC made clear that regardless of whether these tokens have some level of utility, they can easily be purchased on the app by people who have no interest beyond investing. And Coinbase generates revenue by executing those trades.
“Coinbase makes these crypto assets available for trading,” the SEC said, “without restricting transactions to those who might acquire or treat the asset as anything other than as an investment.”
Bitcoin fell Tuesday after the Securities and Exchange Commission charged digital-asset exchange Coinbase Global Inc. COIN, -12.68%
with operating an unregistered national securities exchange, brokerage and clearing agency. Bitcoin was down 1.1% at $25,492, after dipping as low as $25,350 immediately after the charges were announced. Bitcoin is down more than 6% for the week, after slumping Monday after the SEC charged the world’s largest crypto exchange Binance Holdings Inc. and its co-founder Changpeng Zhao with 13 securities law violations.
Bitcoin is facing a number of headwinds including low liquidity which is contributing to volatility. U.S. regulators are also heavily scrutinizing the crypto industry.
Nurphoto | Getty Images
Bitcoin traded at its lowest level since mid-March on Friday as volatility, driven by low liquidity, continued to hit cryptocurrency markets.
Bitcoin ended the day lower by 2.58% at 26,181.46 after briefly hitting a low of 25,833.34 the lowest level since March 17, according to Coin Metrics. The biggest crypto asset by market cap posted a weekly loss of 11.25%, making it its worst week since Nov. 11.
There are a number of issues facing crypto markets right now including low liquidity, a crackdown on the industry from regulators in the U.S. and macroeconomic worries.
Bitcoin is up around 59% this year but prices have remained volatile, with low liquidity exacerbating moves higher and lower.
Clara Medalie, director of research at Kaiko, said there has been a “notable drop in market depth” for bitcoin.
Market depth refers to a market’s ability to absorb relatively large buy and sell orders. When market depth is low, then relatively small orders can cause the price of an asset to move up or down in a substantial way.
And the liquidity situation could be set to get worse after Bloomberg reported that Jane Street and Jump Crypto, two of the biggest crypto market makers, will take a step back from crypto trading in the U.S. as the country’s regulators continue their crackdown on the nascent industry.
Read more about tech and crypto from CNBC Pro
“While it is yet unclear the catalyst for today’s sharp drop, the volatility is to be expected given the current state of liquidity, especially after larger market maker Jane Street and Jump Crypto revealed they were winding down their crypto exposure,” Medalie said.
Liquidity has been a big issue for crypto markets since the closure of Silvergate and Signature Bank — two key platforms that people used to buy into the crypto market.
Scrutiny from U.S. regulators on the digital currency industry has ramped up since the collapse of crypto exchange FTX last year.
The U.S. Securities and Exchange Commission warned American crypto exchange Coinbase in March over potential securities law violations. Coinbase CEO Brian Armstrong said the company is preparing for a years-long court battle with the SEC.
The crypto industry is in a battle with U.S. regulators, accusing the SEC and the U.S. government of not laying out clear rules.
Meanwhile, the bitcoin network itself has faced congestion in recent days with Binance last week forced to temporarily halt bitcoin withdrawals. Bitcoin transaction fees spiked this week and while they are coming down, they still remain at elevated levels. The original bitcoin network was not designed to handle high-volume transactions.
“Bitcoin’s attempts to break through $30,000 have come undone amidst a triple whammy of congestion issues on the blockchain, liquidity constraints caused by the scaling back of top market-makers Jane Street and Jump Crypto, and ever-circling regulators,” Antoni Trenchev, co-founder at Nexo, told CNBC via email on Friday.
Brian Armstrong, co-founder and chief executive officer of Coinbase Inc., speaks during the Singapore Fintech Festival, in Singapore, Nov. 4, 2022.
Bryan van der Beek | Bloomberg | Getty Images
The CEO of cryptocurrency exchange Coinbase, Brian Armstrong, doubled down on his criticisms of the U.S. Securities and Exchange Commission chief Gary Gensler Monday, but added the exchange would not leave the U.S. despite the regulatory uncertainty the company is facing in the country.
Coinbase has been under intense regulatory scrutiny in the U.S. lately following a grim year for the crypto industry which saw major companies like FTX and Terra fail, prices plunge, and investors lose billions of dollars in the process.
The SEC earlier this year served Coinbase with a Wells Notice, a letter that the regulator sends to a company or firm at the conclusion of an SEC investigation that states the SEC is planning to bring an enforcement action against them.
At the heart of the regulator’s dispute with Coinbase, and a host of other crypto companies, is the allegation that it is selling unregistered securities to investors. Coinbase disputes this.
“The SEC is a bit of an outlier here,” Armstrong told CNBC’s Dan Murphy in an interview in Dubai Monday. “There’s kind of a lone crusade, if you will, with Gary Gensler, the chair there, and he has taken a more anti-crypto view for some reason.”
“I don’t think he’s necessarily trying to regulate the industry as much as maybe curtail it. But he’s created some lawsuits, and I think it’s quite unhelpful for the industry in the U.S. writ large, but it also is an opportunity for Coinbase to go get that clarity from the courts that we feel will really benefit the crypto industry and also the U.S. more broadly.”
The SEC was not immediately available for comment when contacted by CNBC.
Armstrong also rowed back on a suggestion he made last month that the company may be forced to move its headquarters overseas.
“Coinbase is not going to relocate overseas,” Armstrong said. “We’re always going to have a U.S. presence … But the U.S. is a little bit behind right now.”
“I would say we’re seeing more thoughtful approaches, for instance, in the EU [European Union], they’ve actually already passed comprehensive crypto legislation, the U.K. has been incredibly welcoming, and for us there, and that’s been a hub where we’ve decided to serve the U.K. market.”
At a fintech conference in London in April, Armstrong said that Coinbase may consider relocating outside the U.S. if the current regulatory headwinds persist. He said the U.S. “has the potential to be an important market in crypto” but right now is not delivering regulatory clarity.
If this goes on, he said, then Coinbase would consider options of investing more abroad, including relocating from the U.S. to elsewhere.
Still, Armstrong said Monday that Coinbase was looking to increase its international investments, stating it is “very interested” in the United Arab Emirates as a country to do more investment in. Dubai has been a notably favorable regulator when it comes to crypto, courting business from the likes of Binance and Kraken.
Noting that it was his first visit to the UAE, Armstrong said: “I’m here to learn and listen and meet with the relevant regulators both in Abu Dhabi and here in Dubai and decide if this is a good place for us to serve a large region of the world.”
Upgrade CEO Renaud Laplanche speaks at a conference in Brooklyn, New York, in 2018.
Alex Flynn | Bloomberg via Getty Images
The technology industry is known for innovation and spawning the next big thing. But at a time of economic uncertainty and rising interest rates, a growing piece of the tech sector is going after one of the most noninnovative products on the planet: yield.
With U.S. Treasury yields climbing late last year to their highest in more than a decade, consumers and investors can finally generate returns just by parking their money in savings accounts.
Banks are responding by offering higher-yielding offerings. American Express, for example, offers consumers a 3.75% annual percentage yield (APY), and First Citizens‘ CIT Bank has a 4.75% APY for customers with at least $5,000 in deposits. Ally Bank, which is online only, is promoting a 4.8% certificate of deposit.
However, some of the highest rates available to savers aren’t coming from traditional financial firms or credit unions, but rather from companies in and around Silicon Valley.
Apple is the most notable new entrant. Last month, the iPhone maker launched its Apple Card savings account with a generous 4.15% APY in partnership with Wall Street giant Goldman Sachs.
Then there’s the whole fintech market, consisting of companies offering consumer financial services with a focus on digital products and a friendly mobile experience instead of physical branches with costly bank tellers and loan officers.
Stock trading app Robinhood has a feature called Robinhood Gold, which offers 4.65% APY. Interest is earned on uninvested cash swept from the client’s brokerage account to partner banks. It’s part of a $5-a-month subscription that also includes lower borrowing costs for margin investing and research for stock investing.
The company lifted its yield from 4.4% on Wednesday after the Federal Reserve approved its 10th rate increase in a little more than a year, raising its benchmark borrowing rate by 0.25 percentage point to a target range of 5%-5.25%.
Fed Chair Jerome Powell speaks during a conference at the Federal Reserve Bank of Chicago on June 4, 2019.
Scott Olson | Getty Images
“At Robinhood, we’re always looking for ways to help our customers make their money work for them,” the company said in a press release announcing its hike.
LendingClub, an online lender, is promoting an account with a 4.25% yield. The company told CNBC that deposit growth was up 13% for the first quarter of 2023 compared with the prior quarter, “as depositors looked to diversify their money out of traditional banks and earn increased savings.” Year over year, savings deposits have increased by 81%.
And Upgrade, which is led by LendingClub founder Renaud Laplanche, offers 4.56% for customers with a minimum balance of $1,000.
“It’s really a trade-off for consumers, between safety or the appearance of safety, and yield,” Laplanche told CNBC. Upgrade, which is based in San Francisco, and most other fintech players keep customer deposits with institutions backed by the Federal Deposit Insurance Corp., so consumer funds are safe up to the $250,000 threshold.
SoFi is the rare example of a fintech with a banking charter, which it acquired last year. It offers a high-yield savings product with a 4.2% APY.
The story isn’t just about rising interest rates.
Across the emerging fintech spectrum, companies like Upgrade are, intentionally or not, taking advantage of a moment of upheaval in traditional finance. On Monday, First Republic became the third American bank to fail since March, following the collapses of Silicon Valley Bank and Signature Bank. All three saw depositors rush for the exits as concerns about a liquidity crunch led to a cycle of doom.
Shares of PacWest and other regional banks have plummeted this week, even after First Republic’s orchestrated sale to JPMorgan Chase was meant to signal stability in the system.
After the collapse of SVB, Laplanche said Upgrade’s banking partners came to the company and asked it to step up the inflow of funds, an apparent effort to stanch the withdrawals at smaller banks. Upgrade farms out the money it attracts to a network of 200 small- and medium-sized banks and credit unions that pay the company for the deposits.
For well over a decade, before the recent jump in rates, savings accounts were dead money. Borrowing rates were so low that banks couldn’t profitably offer yield on deposits. Also, stocks were on such a tear that investors were doing just fine in equities and index funds. A subset of those with a stomach for risk went big in crypto.
As the price of bitcoin soared, a number of crypto exchanges and lenders began mimicking the banks’ savings model, offering very high yield (up to 20% annually) for investors to store their crypto. Those exchanges are now bankrupt following the crypto industry’s meltdown last year, and many thousands of clients lost their funds.
There is some potential instability for fintechs, even those outside of the crypto space. Many of them, including Upgrade and Affirm, partner with Cross River Bank, which serves as the regulated bank for companies that don’t have charters, allowing them to offer lending and credit products.
Last week, Cross River was hit with a consent order from the FDIC for what the agency called “unsafe or unsound banking practices.”
Cross River said in a statement that the order was focused on fair lending issues that occurred in 2021, and that it “places no limitations on our extensive existing fintech partnerships or the credit products we presently offer in partnership with them.”
While fintechs broadly are under far less regulatory pressure than crypto companies,the FDIC’s action suggests that regulators are beginning to pay closer attention to the kinds of products that high-yield accounts are designed to complement.
Still, the emerging group of high-yield savings products are much more mainstream than what the crypto platforms were promoting. That’s largely because the deposits come with government-backed insurance protections, which have a long history of safety.
They’re also not designed to be big profit centers. Rather, by offering high yields for consumers who have long housed their money in stagnant accounts, tech and fintech companies are opening the door to potentially new customers.
Apple has a whole suite of financial products, including a credit card and payments app, that pair smoothly with the savings account, which is only available to the 6 million-plus Apple Card holders. Those customers reportedly put in nearly $1 billion in deposits in the first four days the service was on the market.
Apple didn’t respond to a request for comment. CEO Tim Cook said on the company’s earnings call Thursday that, “we are very pleased with the initial response on it. It’s been incredible.”
Apple savings account
Apple
Robinhood, meanwhile, wants more people to use its trading platform, and companies like LendingClub and SoFi are building relationships with potential borrowers.
Laplanche said high-yield savings accounts, while compelling for the consumer, aren’t core to most fintech businesses but serve as an onboarding tool to more lucrative products, like consumer lending or conventional credit cards.
“We started with credit,” Laplanche said. “We think that’s a better strategy.”
SoFi launched its high-yield savings account in February of last year. In its annual SEC filing, the company said that offering checking and high-yield savings accounts provided “more daily interactions with our members.”
Affirm, best known as a buy now, pay later firm, has offered a savings account since 2020 as part of a “full suite” of financial products. Its yield is currently 3.75%.
“Consumers can use our app to manage payments, open a high-yield savings account, and access a personalized marketplace,” the company said in a 2022 SEC filing. A spokesperson for Affirm told CNBC that the saving account is “one of the many solutions in our suite of products that empower consumers with a smarter way to manage their finances.”
Set against the backdrop of a regional banking crisis, savings products from anywhere but a national bank might seem unappealing. But chasing yield does come with at least a little bit of risk.
“Citi or Chase, feels like it’s safe,” to the consumer, Laplanche said. “Apple and Goldman aren’t inherently risky, but it’s not the same as Chase.”
— CNBC’s Darla Mercado contributed to this report.
Brian Armstrong, co-founder and chief executive officer of Coinbase Inc., speaks during the Singapore Fintech Festival, in Singapore, on Friday, Nov. 4, 2022.
Bryan van der Beek | Bloomberg | Getty Images
Crypto exchange Coinbase offered a fiery response on Thursday to last month’s Wells notice from the SEC, telling the federal regulator that an enforcement action against the crypto exchange would pose “major programmatic risks” to the SEC that would “fail on the merits.”
“Coinbase does not list, clear, or effect trading in securities,” the company’s response said. The analysis SEC did staffers to justify an enforcement action “appears to rest on superficial and incorrect analogies to products and services offered by others,” Coinbase wrote in a blog post from chief legal officer Paul Grewal.
Separately, Grewal told CNBC, “At the time when we went public we had detailed discussions with the SEC about the very aspects of our business that are now — two years later — the subject of the Wells notice. Nothing has changed.”
The SEC indicated to Coinbase in a March wells notice that its spot trading, staking, custody and institutional trading businesses were at risk.The SEC’s warning to Coinbase noted that the regulator would allege Coinbase was offering and selling unregistered securities, in violation of federal law. The SEC has used unregistered offering and sale violations to force other crypto exchanges to close services in the U.S., including the crypto exchange Kraken’s staking-as-a-service product.
If the SEC succeeded, it could force Coinbase to close down those units. To date, the SEC has never approved a crypto-asset entity as an national securities exchange, despite an extensive dialogue with Coinbase over the years.
Executives at the crypto firm have signaled for months that the Coinbase is ready to grapple with the SEC in an existential case not just for Coinbase but the future of the crypto industry in the U.S. at large.
Coinbase’s noted that the company’s years-long efforts to cooperate with SEC securities staff produced no concerns from SEC staffers until recently. Coinbase also noted that the SEC could have denied the company permission to go public in 2021, when it reviewed Coinbase’s S-1 filing.
Perhaps most consequentially for the rest of the U.S. crypto industry, Coinbase also argues that proposed charges rely on “flawed and untested” theories involving investment contracts, spot markets, and custody services.
Securities lawyers rely on something known as the Howey test, from a Supreme Court case where the SEC sued an Florida orange grove operator for a leaseback and profit-sharing arrangement involving the sale of oranges.
The four elements required to determine whether transactions constitute investment contracts: an investment, in common enterprise, and reasonable expectation of profit, from derived from the work of others.
Coinbase is a secondary market, meaning that investors buy and sell securities that they already own rather than purchasing them directly from an issuer. The Nasdaq and the NYSE are also secondary markets for U.S. equities. Courts have already been reluctant to extend “Howey’sreach to include the secondary trading of assets where no issuer is involved,” Coinbase’s response noted.
Coinbase also issued a point-by-point repudiation of Howey’s applicability to the exchange’s staking service. “Coinbase’s retail staking services fail all four prongs of the Howey test,” Coinbase’s response said.
Coinbase is represented by Sullivan & Cromwell.
“The SEC generally does not acknowledge the existence or non-existence of any investigation unless or until charges are filed,” a spokesperson for the SEC told CNBC.
“Coinbase has never wanted to litigate with the Commission. The Commission should not want to litigate either,” Coinbase wrote in its response. “Litigation will put the Commission’s own actions on trial,” Coinbase said, and “erode public trust cultivated over decades.
Popular crypto exchange Coinbase COIN, -7.27%
late Monday asked a federal court to force the U.S. Securities and Exchange Commission to respond yes or no to its petition from July 2022 to make formal rules around digital-asset regulation.
Coinbase’s petition requested that the “Commission propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods, including potential rules to identify which digital assets are securities.”
In March, Coinbase was hit with a Wells notice from the SEC, identifying potential violations of securities laws that might spur it to take legal action. The notice came after nine months of back-and-forth between the SEC and Coinbase, CEO Brian Armstrong said in March.
Coinbase was expected to respond to the notice by the end of April, but Monday’s filing reveals that Coinbase believes the SEC’s approach doesn’t provide enough regulatory guidance for crypto companies in the U.S. to operate.
“The SEC at a minimum must set forth how those inapt and inapposite requirements are to be adapted to digital assets. But the SEC has refused to do even that,” the filing says. “It has not conducted any rulemaking to provide the regulatory clarity and process that companies need to determine which digital asset products and services to register and how to make the registration that the SEC now demands.”
Coinbase shares slid more than 7% on Monday but are up 55% year to date. Still, the stock is down nearly 60% over the past 12 months. In comparison, the S&P 500 SPX, +0.09%
is up nearly 8% in 2023 and has declined almost 4% over the past year.
Ether has spiked this week to a nine-month high, ahead of a major network upgrade that some crypto enthusiasts say will make the digital currency a more profitable long-term investment.
The world’s second-biggest cryptocurrency is up about 6% over the past three days, surpassing $1,900, while bitcoin is roughly flat over that stretch.
Beginning next Wednesday, an upgrade to the blockchain, dubbed “Shapella,” will allow owners of ether to withdraw their assets. Up to this point, investors would have to use centralized exchanges like Coinbase or decentralized finance (DeFi) protocols like Lido, to essentially exchange their locked-up ether for a token of equivalent value.
Ethereum previously had a vast network of miners all over the planet running highly specialized computers that crunched math equations in order to validate transactions. After the so-called “Merge” upgrade in September, ethereum migrated to a proof-of-stake system, swapping out miners for validators. Instead of running large banks of computers, validators leverage their existing cache of ether as a means to verify transactions and mint new tokens.
“Ether itself becomes a productive asset,” said Danny Ryan, a researcher at the Ethereum Foundation, regarding the September upgrade. “It’s not something you might just speculate on, but it’s something that can earn returns.”
In the post-merge era, ether has taken on some characteristics of a traditional financial asset, paying interest to holders.
“It’s probably the lowest-risk return inside of the ethereum ecosystem,” said Ryan, adding that yield in other corners of DeFi involve smart contracts and other types of counter-party risk.
So far this year, ether has underperformed bitcoin, but recent gains have helped to close the gap. Ether is up nearly 59% this year, versus bitcoin’s gain of 70% in 2023.
Currently, over 18 million ether tokens worth about $32.5 billion are staked, meaning that 15% of ether’s total supply are considered locked assets.
While the coming upgrade will unlock much of that value, giving holders more control over their assets, there’s some concern that the release of so many tokens will have a flooding effect of sorts on the market. Even with capped withdrawals, some $2.4 billion worth of ether could hit the open market, K33 Research said in a note on Tuesday.
“A plunge is likely to happen shortly after the completion of the upgrade, as a huge amount of ETH will be unlocked, and many people will also be selling their ETH,” said Ilya Volkov, who runs a blockchain-based fintech platform. Volkov said he’s bullish over the long term.
The ratio between the open interest of ether put and call options reached its highest level since May on Tuesday, according to data presented by crypto data analytics and news firm The Block. That could signal a buildup of bearish bets leading up to the network upgrade.
According to research from Bernstein, of the 18 million ether tokens locked on the blockchain, almost 70% are staked through protocols like Lido, creating a measure of liquidity for investors.
“Liquidity for 70% of staked ETH is not new, they could do it anyways,” Bernstein wrote. The firm described the remaining 30% of holders as “original believers,” who are unlikely exit their positions at this price.
Having the ability to deposit and withdraw tokens might encourage more investors to stake ether, and some analysts said they expect a significant influx of capital onto the network once it proves that money that’s been staked can be taken out with relative ease.
In this photo illustration, the Coinbase logo is displayed on a smartphone screen.
Rafael Henrique | SOPA Images | Lightrocket | Getty Images
The Securities and Exchange Commission issued crypto exchange Coinbase a Wells notice, warning the company that it identified potential violations of U.S. securities law.
Coinbase shares fell nearly 12% in extended trading after the news broke on Wednesday, adding to an 8.16% drop during regular trading hours.
“Based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet,” Coinbase said in a regulatory filing. “The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”
The SEC has ramped up its enforcement of the crypto industry, bearing down on companies and projects that the regulator alleges were hawking unregistered securities. Reports first surfaced of an SEC probe into Coinbase in mid-2022.
Months before the collapse of FTX in November, crypto markets were roiled by rising interest rates and a broad move out of risk, which contributed to the collapse of stablecoin Terra and the demise of crypto hedge fund Three Arrows Capital and exchanges Celsius and Voyager.
A Wells notice is typically one of the final steps before the SEC formally issues charges. It generally lays out the framework of the regulatory argument and offers the potentially accused an opportunity to rebut the SEC’s claims.
Coinbase described the investigation as “cursory,” and said the Wells notice provided relatively little information about potential violations.
“Although we don’t take this development lightly, we are very confident in the way we run our business – the same business we presented to the SEC in order for us to become a public company in 2021,” Coinbase Chief Legal Officer Paul Grewal said in a blog post.
The company said that until the resolution of any legal processes, the exchange’s offerings would continue to operate as usual.
Coinbase executives, including founder and CEO Brian Armstrong, have pushed back against perceived overreach by the SEC, which has moved aggressively against the crypto industry since the collapse of FTX. At the direction of SEC chair Gary Gensler, the regulator has issued enforcement actions against multiple heavyweights, including Gemini, Genesis, TRON executive Justin Sun, Do Kwon, and crypto exchange Kraken.
“We are prepared for this disappointing outcome and confident in the legality of our assets and services,” Grewal said in a statement. “If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets.”
The SEC sent a Wells notice to stablecoin issuer Paxos in February. “We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary,” a Paxos spokesperson told CNBC at the time.
Grewal said Coinbase is looking for more regulatory clarity.
“Tell us the rules and we will follow them,” he said. “Give us an actual path to register, and we will register the parts of our business that need registering.”
It’s time to move to the sidelines on Coinbase Global , according to Oppenheimer. Analyst Owen Lau downgraded the cryptocurrency exchange platform to perform from outperform, and removed his $70 price target, citing troubling regulatory signals for the digital asset sector following the collapse of Silicon Valley Bank and Signature Bank and other banks. The downgrade comes after U.S. Securities and Exchange Commission slapped Coinbase with a Wells notice, saying it’s identified possible violations of U.S. securities law . It also comes after the White House “strongly criticized” the digital asset sector this month . “While we remain highly supportive of blockchain/digital asset development in the US, under this unhealthy regulatory climate, we are increasingly worried about the fairness of the enforcement actions, and the ability for the ecosystem to grow with seemingly limited and shrinking support from the banking system in the US,” Lau wrote Thursday. Coinbase shares surged nearly 118% in 2023, far outstripping the 3% gain in the S & P 500 over the same time period. The stock dropped 11% in Thursday premarket trading. COIN 1D mountain Coinbase shares 1-day However, Lau said digital asset firms face a challenging path toward broader acceptance at the White House. After attending a DC event and meeting with staff members at Congress, the analyst said cryptocurrencies could be “scapegoated” for the collapse of banks that specialized in lending to the industry. Still, the analyst expects the rise in volatility could mean a “binary outcome” for Coinbase. “Recent strength in Bitcoin indicates that people have called for alternative financial systems, but it could also become the victim of its success,” Lau wrote. “While we downgrade Coinbase shares, we believe both upside opportunities and downside risk have increased substantially, and we may find an attractive risk/reward entry point in the future.” Other analysts commented on Coinbase following the Wells notice. Mizuho Securities’ Dan Dolev reiterated an underperform rating on Coinbase, saying the Wells notice is a “significant overhang” of the stock in his view. The notice could affect roughly one-third of Coinbase’s revenue, according to the note. Trevor Williams of Jefferies, who has a hold rating on Coinbase, called the Wells notice an “ominous sign” that is “a likely precursor to an enforcement action.” Of note, revenue from alternative coin trading and staking could be impacted. —CNBC’s Michael Bloom contributed to this report.
