Regulatory Showdown in Washington Puts Coinbase’s Core Revenue at Risk

Coinbase US19260Q1076

Coinbase finds itself navigating treacherous waters as political headwinds in Washington threaten a fundamental part of its business model. This comes at a time when Wall Street analysts are growing more cautious, adjusting their outlooks for the cryptocurrency exchange's stock.

The immediate threat stems from a pivotal piece of legislation known as the CLARITY Act, which aims to establish a regulatory framework for digital assets. Reports emerged this week indicating Coinbase is considering withdrawing its previous support for the bill. The company's concern centers on a specific provision that would restrict interest earnings from stablecoin reserves solely to federally regulated banking institutions.

This potential shift in the political landscape represents a direct challenge to Coinbase's financial stability. Revenue generated from holdings of the USD Coin (USDC) stablecoin has matured into a crucial and steady income stream for the company. This segment helps balance volatility inherent in its core trading operations. Estimates suggest this revenue contributed approximately $1.3 billion in 2025. Losing access to this profitability pillar would constitute a significant blow.

Wall Street Adjusts Its Targets Amid Uncertainty

Simultaneously, the company's equity has faced pressure from revised analyst assessments. Experts at Oppenheimer maintained their "Buy" recommendation but slightly lowered their price target to $370. A more pronounced note of caution came from Jefferies, where analysts slashed their target substantially from $367 to $268, reaffirming a "Hold" rating on the shares.

This growing wariness is fueled by concerns over a potential cooling in trading volumes following a robust third quarter. While some market observers, like those at Bernstein who reiterated an "Outperform" rating, continue to highlight long-term potential from institutional adoption, short-term attention is fixed on transaction-based revenue trends. Coinbase shares recently traded around $243, marking a decline of roughly 32% from their 52-week peak.

A Pivotal Period Ahead

The path forward for Coinbase now hinges critically on two near-term developments. The immediate focus is on the U.S. Senate's handling of the CLARITY Act this week and whether the exchange's lobbying efforts can alter the bill's trajectory. For fundamental clarity on the company's operational performance, investors will await fourth-quarter 2025 results, scheduled for release in mid-to-late February 2026.