Rating agency Moody’s downgraded the guaranteed senior unsecured notes and corporate family rank of crypto exchange Coinbase.
The agency cited the current crypto environment and the harsh conditions digital assets have to endure right now as the reasons behind the downgrade. However, Coinbase received a stable outlook due to its current liquidity reserves and capacity to absorb continuous drains in cash flow experienced by the company. The rating agency also took notice of the recent employee layoffs performed by Coinbase.
The current corporate family rating of Coinbase is B2 and it was downgraded from Ba3. Notse decreased to B1 after Moody’s considered that Ba2 is too high at the moment. According to the agency, this announcement came after Coinbase’s seriously impacted revenue and cash flow production capability which are cited as direct consequences of the crypto industry’s current status.
The rating also took into consideration regulatory changes and the unpredictable outcome they might lead to, especially after the downfall of FTX. According to Moody’s, harsher regulations and supervision could lead to a negative impact on credit concerning the revenues of Coinbase, cumulated with an increase in costs.
As a way to increase its ratings, Coinbase should push for clearer regulations that don’t impact the company’s revenue streams in a negative way, provided that its staff reduction leads to profit.