The Crypto Update: Coinbase Faces SEC Investigation

Coinbase Global and the Securities and Exchange Commission are at odds over a question that could be a turning point for the whole cryptocurrency industry: Are some tokens actually investments? This big question has basically given rise to the case of why coinbase faces SEC investigation in recent times. 

Now, it looks like the fight between the cryptocurrency exchange and the SEC will get a lot worse. Three anonymous sources told Bloomberg that the SEC is looking into whether or not Coinbase did anything wrong by letting Americans trade digital products that ought to be registered as securities.

How Coinbase Faces SEC Investigation? 

Three people with knowledge of the situation say that the US is looking into whether Coinbase Global Inc. let Americans trade crypto certificates that ought to have been enrolled as securities. The company’s shares went down by 21%.

Two people who asked not to be named because the investigation hasn’t been made public said that the US Securities and Exchange Commission is paying more attention to Coinbase now that it lets people trade more types of tokens. The SEC’s enforcement unit started looking into this before it started looking into an accusation insider trading scheme, which led the SEC to file a lawsuit against a former Coinbase supervisor and two other people last week.

How Coinbase Responded To The SEC Investigation? 

This didn’t sit well with Coinbase. In a tweet last Thursday, Coinbase’s chief legal officer, Paul Grewal, said, “We disagree with the SEC’s claim any of the digital currencies we list are securities.” Last Thursday, the company also asked the SEC to “start making rules on digital asset securities” by filing a petition. This put more pressure on the government agency to make stricter rules for crypto. He went on to say that “We are self-assured that our thorough due diligence process, which the SEC has indeed looked at, keeps bonds off our platform,” said Former Chief Officer Paul Grewal on Twitter. “We look forward to working with SEC on this issue.” Even though the SEC hasn’t said anything.

Coinbase and the agency have fought many times over how it supervises the sector, and the company asked the SEC last week to come up with clearer rules. In the meantime, Coinbase has increased the number of tokens it offers. For years, the company was pretty careful about what it did.

Did It Impact The US Trades?

As virtual currencies have dropped from their all-time highs, wiping out tens of trillions of dollars in selling price, the calls for US regulatory authorities to do more to keep an eye on them have grown louder in Washington. Gary Gensler, the head of the SEC, has focused on marketplaces and said they ought to do more to support vulnerable investors.

Coinbase faces SEC investigation even if it is the biggest platform for trading in the US. It lets people trade and over 150 reward points. If these products were considered securities, the company might have to register with the SEC as an exchange. The price of Coinbase shares in New York dropped by $14.14 to $52.93. This means that the stock is down 79 percent this year.

The SEC Allegations 

On July 21, the SEC said that a former employee of the company broke its rules on insider trading by giving his brother as well as a friend information that helped them buy tokens right before they were mentioned on the forum. Even though the agency didn’t say Coinbase did anything wrong, it said it had found that 9 of the large numbers of virtual currency the men bought and sold were securities, including seven that Coinbase says it lists.

In response to why coinbase faces SEC investigation, Coinbase wrote on its blog, “Coinbase does not list bonds. “That’s the end.” Grewal tried to point out that Justice Department, which looked at the same factual information as the SEC, chose not to file equities fraud charges. He also stated that before enumerating tokens, Coinbase checks to see if an asset could be taken into account security and “also thinks about the asset’s compliance with regulations and information security.”

When the SEC’s enforcement unit looks into a company or person, the regulator may decide to sue the company or person.

The Bottom Line 

However, the SEC hasn’t said very much about which coins are securities. Instead, it’s up to crypto exchanges to decide whether or not to list an asset. The SEC is also paying more attention to Coinbase since the trading system has increased the number of coins customers can exchange, the report said. But platform operators try not to offer those things that are considered securities since doing so may poke international investment rules, among which crypto fans say don’t work with digital assets.

One thought on “The Crypto Update: Coinbase Faces SEC Investigation

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