The Securities and Exchange Commission (SEC) has been pressuring cryptocurrency exchange Coinbase for years to be more transparent about its relationship with stablecoin issuer Circle, according to recent filings. A batch of correspondence from January to March 2025 was uploaded to the SEC, shedding light on the ongoing scrutiny.
In a January letter, the SEC’s Division of Corporation Finance requested that Coinbase clarify how its revenue from stablecoins, particularly from the distribution of USDC, is generated. The SEC also asked for details on the formula used to determine Coinbase’s share of stablecoin revenue in its future disclosures.
The SEC’s focus on Coinbase and Circle’s relationship dates back to October 2023 under former SEC Chair Gary Gensler. The regulator requested revisions to certain financial statements dating back to 2022 and sought clarification on how stablecoin revenue is recognized.
After being approached for comment, Coinbase’s Chief Legal Officer, Paul Grewal, confirmed that the SEC’s requests had been fully resolved without requiring any restatements or amendments to previous earnings statements. Grewal emphasized Coinbase’s commitment to expanding blockchain adoption, noting that the dialogue with the SEC began two years after the company went public.
While Coinbase has provided audited financial statements for years, it has been somewhat reserved about its ties to Circle, the issuer of USDC, the industry’s second-largest stablecoin by market cap. Coinbase earns revenue from assets backing USDC, which includes cash and U.S. Treasuries. In 2024, Coinbase reported earning $910 million in stablecoin revenue, a 33% increase from the previous year.
Coinbase’s goal is to surpass Tether’s USDT to become the world’s number one dollar stablecoin. An IPO filing by Circle revealed that Coinbase receives half of Circle’s residual revenue from USDC reserves, with Circle earning $1.7 billion in revenue and reserve income in 2024.
Coinbase’s latest earnings statement provides a more detailed explanation of how it generates revenue from USDC, including the evolution of its commercial relationship with Circle. The agreement with Circle allows Coinbase to earn revenue based on the proportion of USDC in circulation on its platform.
As lawmakers in Washington, D.C., consider legislation to regulate stablecoin issuers like Circle and Tether, experts believe that a regulatory framework could pave the way for new competitors in the stablecoin market. Overall, Coinbase’s ongoing dialogue with the SEC reflects the evolving landscape of cryptocurrency regulation and the importance of transparency in the industry.
This article was edited by Stacy Elliott.