Crypto companies are playing poker with the SEC as agency cracks down on the industry
Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.
Roman Strelchenko | 500Px Plus | Getty Images
Cryptocurrency companies are playing a game of poker with the Securities and Exchange Commission, making bold threats to leave the U.S. as the regulator steps up pressure on the industry to toe the line.
Major players are hoping that the SEC and Washington takes, what crypto watchers see as bluffs, seriously and soften the hard line that regulators have taken on the industry.
Executives at firms including crypto exchange Coinbase and blockchain services company Ripple have piled on with comments laying into the SEC and signaling plans to shift business overseas, in a bid to rally support and send a message to U.S. politicians concerned that the country may miss out on a key technological innovation.
Coinbase CEO Brian Armstrong said last week that the SEC was on a “lone crusade” with its tough actions against certain crypto companies. He added that Chair Gary Gensler had taken an “anti-crypto view,” despite earlier being a supporter of the industry during his time as an economics professor at the MIT Sloan School of Management.
“The SEC is a bit of an outlier here,” Armstrong told CNBC’s Dan Murphy in an interview in Dubai. “I don’t think [Gensler is] 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.”
Brad Garlinghouse, CEO of Ripple, also tore into the SEC this week. When asked for his message to Gensler as the company announced an expansion into Dubai, he quipped, “Who?” before later saying Ripple will have spent $200 million defending itself against a lawsuit initiated by the regulator by the time it is over.
“I find it as a company that started in the United States and as somebody who is a U.S. citizen, it’s sad. I have sadness about this. The U.S. is getting passed not just by a little bit but by a lot,” Garlinghouse said.
“The tough thing about this is you have a country that I think has put politics ahead of policy and that’s not a good decision if you’re trying to invest in the economy.”
Dubai and Europe have proven to be much more favorable markets with their virtual asset regulatory frameworks, Garlinghouse said, adding: “The United States is definitely stuck.”
Garlinghouse, Armstrong and other crypto bosses have made threats to leave the U.S., highlighting concern from the industry that the SEC’s crackdown is becoming too harsh. The regulator has taken strong enforcement actions against companies including Ripple, Coinbase, Kraken and Paxos, accusing each of flouting securities laws.
The SEC’s contention is that most tokens in the market may qualify as securities, which would subject them to much stricter requirements around registration and disclosure. Crypto firms, naturally, have denied assets they issue or list on their platforms should be treated as securities.
Will they stay or will they go?
The question is: could they actually leave? It looks pretty unlikely.
“The U.S. is one of the largest markets for crypto, and hence it is highly unlikely that they will leave,” Larisa Yarovaya, associate professor of finance at Southampton University, told CNBC via email.
“The biggest fear of crypto companies is that regulation will cause panic among crypto investors and prices will go down. To look confident (even arrogant) is a common tactic of crypto company CEOs. They think this will translate into investors’ confidence, overconfidence in some cases, and will encourage further irrational behaviour among investors, e.g. HODL [hold on for dear life] even when markets are falling.”
Ripple’s Garlinghouse has been threatening to move his company’s headquarters overseas since 2020. In October that year, he said the U.K., Switzerland, Singapore, Japan and the United Arab Emirates were under consideration for Ripple’s potential move abroad.
That hasn’t happened yet.
Coinbase’s chief, meanwhile, suggested at a London fintech conference in April that the firm would consider options of investing more abroad, including relocating from the U.S. to elsewhere, if the exchange doesn’t get regulatory clarity in the U.S.
A month later, Armstrong said Coinbase “is not going to relocate overseas.”
“We’re always going to have a U.S. presence … But the U.S. is a little bit behind right now,” he told CNBC.
The U.S. is a huge market for the industry, with over 50 million Americans saying they own some crypto, according to a survey conducted by Morning Consult for Coinbase.
“There’s a much greater focus on the international markets for those firms. But at the top end of the market, personally I just can’t see that ever happening that you leave the United States market completely,” Jonathan Levin, co-founder of Chainalysis, told CNBC in an interview in London.
“It’s more about how much do you invest in new international expansion where maybe that wasn’t as high up on the agenda, but now it’s let’s look at France, let’s look at the U.K.”
On top of this, the practicalities of moving these already large companies out of the U.S. would be tough.
“Although these industries are virtual by their nature, they still need people, and people have families, mortgages, and preferences on where they live. Replacing them with local talent in the new place may be easier said than done,” George Weston, a partner at global offshore law firm Harneys, told CNBC via email.
Regulatory certainty outside the U.S.
Crypto bosses are playing up to some officials’ concerns that the U.S. has become shrouded in regulatory uncertainty while other jurisdictions, like the European Union and U.K., have charged forward with proposed regulatory frameworks for digital assets.
Hester Peirce, a commissioner at the SEC, said at a Financial Times conference last week that the U.S. was “shooting ourselves in the foot by not having a regulatory regime in the U.S.”
She praised the EU on its progress with waving through laws for the crypto industry.
The EU is expected to bring in the first comprehensive set of regulations for digital assets, known as Markets in Crypto Assets (MiCA), sometime in 2024.
“It’s really commendable that Europe was able to get that done so quickly,” Peirce said, according to Reuters. “If we built a good regulatory regime, people would come. I think you will see that with MiCA.”
Diego Ballo Ossio, a partner at law firm Clifford Chance, said other jurisdictions including the U.K. and EU are changing their legislative frameworks to create clear regulatory regimes for exchanges.
“This means that other countries are effectively providing US based exchanges an option – a place to move to. It is not unthinkable that a U.S. exchange decided to create operational hubs in non-U.S. jurisdictions where the product can be safely innovated and enhanced,” he told CNBC.
Binance, the world’s largest crypto exchange, recently said it has become more difficult for the company to operate into the U.S. and that it was minded to establish a regulated operation in the U.K.
Patrick Hillman, the company’s chief strategy officer, said the U.S. “has been very confusing over the past six months,” pointing to the SEC’s actions against Coinbase as a sign of how the country is in a “weird place.”
While the U.S. crypto industry might currently be throwing out empty threats right now, there could be a real issue if regulators in America don’t move forward with thoughtful regulation.
“My conclusion is that I think it is more sabre rattling than a genuine desire to up and leave the U.S., but if the SEC continues down the path it is on, many firms will have no choice but to try another way of doing business. It is existential,” Daniel Csefalvay, a partner at BCLP law firm, told CNBC via email.
Technology
Bitcoin rises to a fresh record above $94,000 as investors watch Trump transition, ETF options
Jonathan Raa | Nurphoto | Getty Images
Bitcoin advanced past $94,000 on Wednesday for the first time as traders continued to monitor President-elect Donald Trump’s transition back to the White House and weighed early options trading on bitcoin ETFs.
The price of the cryptocurrency was last higher by more than 1% at $94,461.75, according to Coin Metrics. Earlier, it traded as high as $94,834.33.
Coinbase shares rose 2%. Meanwhile, MicroStrategy jumped 8%, bringing its week-to-date gains to 36%.
Bitcoin has been regularly hitting fresh records since the election, though in smaller increments since the postelection rally faded last week, on hopes that Trump will usher in a crypto-friendly era for the industry that includes a more supportive regulation and a potential national strategic bitcoin reserve or stockpile.
Bitcoin continues its climb toward $95,000
Traders this week are keeping a close eye on Trump’s appointments for Treasury Secretary and the Securities and Exchange Commission chair.
“We’re still very much in a phase of kind of pricing in the Trump trade,” said Joel Kruger, market strategist at LMAX Group.
He also pointed to the “mainstream, institutional adoption that we’re getting by way of the approval of the bitcoin and ETH spot ETFs this year” and options trading on those ETFs going live beginning Tuesday, which he called “another reflection of the maturation of the crypto market.”
Options on BlackRock’s iShares Bitcoin Trust ETF (IBIT) began trading on the Nasdaq Tuesday. The Grayscale Bitcoin Trust (GBTC), the Grayscale Bitcoin Mini Trust (BTC) and the Bitwise Bitcoin ETF (BITB) are expected to have options available Wednesday.
Elsewhere, traders are looking forward to Nvidia earnings after the bell, which could impact bitcoin’s price. The cryptocurrency often benefits from moves in risk assets broadly, more so this year as institutional investors have become more comfortable with it thanks to bitcoin ETFs.
Fabien Pinckaers, CEO of Belgian-based enterprise software startup Odoo.
Odoo
Odoo, a startup taking on SAP in the realm of enterprise software, boosted its valuation to 5 billion euros ($5.3 billion) in a secondary share round led by Alphabet‘s venture fund and Sequoia Capital.
The Belgium-based company develops open-source enterprise resource planning software, with over 80 applications available on its platform offering businesses tools for accounting, customer relationship management, human resources and e-commerce and website building.
Fabien Pinckaers, CEO and co-founder of Odoo, told CNBC in an interview this week that his company didn’t have a need to raise any primary capital as it is “cash profitable” and growing revenue at a rate of 50% year-over-year. Enterprise resource planning, he said, is “still a very fragmented market.”
“The reason everybody [has] failed [in this market] is that it’s quite complex,” Pinckaers told CNBC. “Small companies have complex needs from accounting to inventory, to website, e-commerce, point-of-sale. It’s a lot and they don’t have budget, and they need something that is simple and affordable.”
“Nobody succeeded to get both,” he added. “You have complex products like SAP that run well for large companies. But it’s complex and expensive.”
Andrew Reed, partner at Sequoia Capital, added that the market Odoo is addressing “just requires more gestation time than most startups both because the core system is very complex, and making it simple to use for small businesses and various countries is no small feat.”
Humble beginnings
Odoo “is not your traditional Silicon Valley tech story,” according to Reed.
Pinckaers opened the company’s first-ever office 22 years ago on a farm in Belgium. That was all he could afford at the time. Later, as the company started bringing in revenue, Odoo opened two additional offices in Belgium, home to the firm’s research and development, support and technical teams.
Today, Pinckaers resides in India with his family. He’s lived there for a year now, working to expand the company’s presence there, hiring more people, increasing marketing and broadening Odoo’s overall partner network.
Odoo had billings of 370 million euros last year and is on track to top 650 million of billings in 2025 — after that, the company is hoping to top the 1 billion-euro billings milestone by 2027. Billings — or the total sum of all invoices for a given year — is Odoo’s preferred metric for tracking annual revenue performance.
Around 80% of Odoo’s business today accounts for open-source software, with the remaining 20% coming from software licensed for a fee, Pinckaers said. Open source refers to a type of software that allows users to access the underlying code — most often free of charge — which they can then modify and adjust.
In no rush to IPO
Despite Odoo now being at the scale of an IPO-ready business, Pinckaers said he’s in no rush to take the company public. If anything, remaining private has given Odoo flexibility to stay focused on investing for the long term, he said.
Odoo’s private backers aren’t in a rush for the firm to go public, either. Alex Nichols, partner at Alphabet’s CapitalG, told CNBC that he’s not worried about “IPO timing,” adding that factors like public market conditions are ultimately “out of our control.”
Pinckaers built the business to the size it is today primarily by bootstrapping — that is, growing without raising external funding. Odoo hasn’t had to raise primary capital from investors in a decade, opting instead to let early investors and employees sell shares in secondary sales.
The last time Odoo secured primary funding was in 2014, when it raised $10 million in a Series B round. Prior to the latest secondary round, Odoo was most recently valued by investors at 3.2 billion euros.
Odoo’s other backers include the likes of private equity firms Summit Partners, Noshaq, and Wallonie Entreprendre, which all sold a portion of their shares to CapitalG and Sequoia as part of the 500-million-euro investment announced on Wednesday.
Even after selling a portion of its shares, Summit remains Odoo’s largest institutional shareholder. Pinckaers himself has never sold his own personal shares.
Technology
Qualcomm says it expects $4 billion in PC chip sales by 2029, as company gets traction beyond smartphones
Qualcomm CEO Cristiano Amon speaks at the Computex forum in Taipei, Taiwan, June 3, 2024.
Ann Wang | Reuters
Qualcomm said on Tuesday that it expects its push into new markets to generate an additional $22 billion per year by 2029.
Of that amount, roughly $4 billion will come from PC chips, Qualcomm said at its investor day on Tuesday. The chipmaker just introduced PC processors earlier this year, when it released Snapdragon X for Windows devices.
The latest forecast marks an important milestone for Qualcomm CEO Cristiano Amon, who took over the company in 2021 with a promise to get past a reliance on smartphones. In fiscal 2024, Qualcomm’s handset business reported $24.86 billion in sales, about 75% of its entire chip business.
Qualcomm also said on Tuesday that automotive revenues would rise about 175% by 2029 to $8 billion, of which 80% is tied to contracts that have already been secured.
“We have been on this trajectory realizing that the technologies we have developed over the many years can be very relevant to a number of different industries beyond mobile,” Amon said at the investor event.
Another $4 billion in revenue will come from industrial chips and $2 billion will come from chips for headsets, a category Qualcomm calls XR. About $4 billion of the forecast is a catch-all for other chip sales, like those for wireless headphones and tablets.
Qualcomm shares are up 16% this year, trailing the Nasdaq, which has gained 26%.
Qualcomm grew rapidly over the past decade as its modems and processors became essential parts for high-end smartphones, especially those running Google Android. Qualcomm also sells modems and related parts to Apple for its iPhones.
But the company has warned investors that Apple could choose to stop buying Qualcomm parts as soon as 2027. Qualcomm said on Tuesday that its growing businesses will more than offset any losses from Apple.
A Li Auto L9 electric vehicle (EV) is seen displayed at the Qualcomm booth during the first China International Supply Chain Expo (CISCE) in Beijing, China November 28, 2023.
Florence Lo | Reuters
Qualcomm’s strategy under Amon has been to use the technology its developed for its handset chips, like modems, processors, and AI accelerators, in new markets, including cars, PCs, and virtual reality. The investor event was the first time in years that the company has given a forecast for those new markets. Qualcomm said its total addressable market is as large as $900 billion.
“We put a strategy in ’21, and we’re not changing our strategy,” Amon said.
Laptop and desktop chips are currently dominated by Intel, which has over 70% percent of the market, according to Mercury Research. Intel reported $29 billion in PC chip sales in its 2023.
“The competitive landscape changed between the Windows and Macs,” Amon said, referring to Apple’s move in 2020 to switch from Intel to its own processors. “We saw that as an opportunity, especially as the ecosystem did not have confidence in the existing players to actually deliver a solution.”
The forecast for XR headsets also hints at the growth potential of the VR market over the next five years. Qualcomm supplies chips to many of the top headset makers, including Meta for its Quest and Ray-Bans products.
When it comes to artificial intelligence, Qualcomm calls itself an “edge AI” company, in contrast to cloud-based AI that’s typically powered by Nvidia processors. Company officials didn’t rule out introducing data center products in an interview with CNBC.
Qualcomm suggested that its mobile chips will be able to run the kind of advanced AI that’s restricted to large server farms today, an indication that that company may benefit from the AI boom down the road as the technology becomes more efficient.
“What you can run on the cloud last year, you can run on the device this year,” Durga Malladi, Qualcomm’s senior vice president in charge of planning, said at the event.
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