Coinbase (COIN) Is Done Playing Nice. It's Suing the FDIC over Records of Its Alleged "Operation Chokepoint 2.0" Debanking Campaign

Coinbase (COIN) is done playing nice. The crypto exchange has gone after the FDIC for what it calls “absurd” delay tactics

Coinbase (COIN) is heating up its battle with the FDIC. The crypto exchange is pushing back against the agency’s request for a 16-day extension to respond to a lawsuit under the Freedom of Information Act.

Coinbase maintains that the FDIC, which has already been granted an extension, has had ample time to prepare its response and is now engaging in delay tactics.

The lawsuit centers on the release of critical records detailing the alleged efforts by the agency to advise banks against working with crypto firms. Coinbase is arguing that the FDIC is trying to sidestep accountability.

“The agency’s interpretation of the default deadline is legally incorrect,” Coinbase stated, deeming the request "unwarranted" and lacking in "sound reason."

This legal clash is part of a broader contention. Coinbase, along with other industry figures, believes that federal agencies engaged in a campaign to pressurize banks into dropping crypto clients without going through proper rulemaking procedures.

Earlier this year, the FDIC released nearly 800 pages of internal documents. These documents, according to Decrypt, highlight how banks were cautioned against offering services to crypto firms.

The agency raised concerns about “reputation risk” to the FDIC in reports about providing advice to institutions on emerging trends in financial innovation. However, these documents don’t necessarily show the agency had safety concerns.

Coinbase CEO Brian Armstrong has described the alleged campaign as “one of the most unethical and un-American things that happened in the Biden administration.”

While antitrust issues in Big Tech have drawn attention, Armstrong argues that the crypto industry is also a critical sector.

Despite the regulatory tension and a recent price downturn in the crypto market, analyst Brett Knoblauch from Cantor Fitzgerald believes Wall Street is still largely clueless about Coinbase’s true value.

This week, the firm initiated coverage of Coinbase stock (COIN) with an “Overweight” rating and a $245 target.

Knoblauch feels that analysts have largely written off Coinbase due to a lackluster 2022 performance and the recent decline in crypto prices. However, he believes there’s more to the story.

According to the firm, a partnership between Coinbase and Circle for stablecoin processing is making Coinbase a more integral part of the Ethereum network. This network handles around 1.5 million transactions daily, which Knoblauch compares to the volume of a "large equities trading day."

A large portion of those transactions involve Circle’s USDC stablecoin, and for every dollar in USDC fees, Coinbase is estimated to receive $0.50. In 2022, Circle’s net revenue was $1.3 billion.

According to Knoblauch’s analysis, if USDC transactions continue at their current pace, and assuming a 50% revenue share for Coinbase, it could generate $6 billion in revenue by 2025. This would be a significant increase from the $1.2 billion reported in 2022.

Moreover, Knoblauch anticipates that Circle will process even more transactions as its role in institutional DeFi expands.

The firm values Coinbase at 20 times its 2025E EPS of $12.22, arriving at a price target of $245. This would indicate a 73% upside potential from the last closing price on August 10.

Coinbase is currently a hot topic on the Hill, with the House Oversight Committee launching a probe to determine whether federal regulators overstepped their boundaries in pressuring banks to close accounts with crypto firms.

As part of its investigation into the alleged "Operation Choke Point 2.0," the committee has sent letters to Coinbase, a16z, and other industry players. They are seeking information on whether lawful businesses were unjustly targeted by the administration.

The FDIC is now requesting 16 days to respond fully to Coinbase’s lawsuit.