The US government is investigating Coinbase for allegedly allowing Americans to trade digital assets that should have been registered as securities, according to sources close to the matter. If true, this would be a violation of US law. The news sent Coinbase’s stock plunging 21%.
US Securities and Exchange Commission Enforcement Actions
According to two people familiar with the matter, the US Securities and Exchange Commission has been paying closer attention to Coinbase since the platform added more tokens that can be traded.
The SEC’s enforcement division has been investigating Coinbase for some time, predating the agency’s probe into an alleged insider trading scheme. Last week, the SEC sued a former Coinbase manager and two other individuals over the alleged scheme.
‘’We are confident in our process for vetting securities and keeping them off our platform, and we look forward to discussing this matter further with the SEC.’’ Chief Legal Officer Paul Grewal stated this on Twitter. The SEC has not yet commented publicly on the matter.
Pressure on US Regulators
The pressure on US regulators to take greater action in overseeing the cryptocurrency industry has intensified as prices have plummeted from record highs, resulting in billions of dollars in market value being wiped out. SEC Chair Gary Gensler has focused on trading platforms, arguing that they need to do more to safeguard retail investors.
Coinbase is the largest US trading platform, allowing Americans to trade more than 150 tokens. If those products were considered securities, then Coinbase would need to register as an exchange with the SEC. However, Coinbase’s stock has fallen 79% this year.
Coinbase and the SEC have had disagreements about how the agency regulates the cryptocurrency industry. Last week, Coinbase called on the SEC to create more clear and concise rules. The firm has also been gradually increasing the number of tokens it offers.
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