The U.S. Securities and Exchange Commission (SEC) accused Coinbase of “potential violations of securities law.” The regulator questioned the legitimacy of the cryptocurrency exchange’s operations.
Coinbase posted on its blog that the crypto exchange received a “Wells notice” from the SEC, in which the regulator informed the company that it suspects “potential violations of securities law” and is ready to take enforcement action.
Representatives of the exchange sent a request to the SEC, asking for clarification about what assets on the platform the regulator identifies as securities. According to Paul Grewal, Chief Legal Officer at Coinbase, the SEC “declined to do so.” He believes the regulator’s investigation not only targets some of the exchange’s digital assets, but also Coinbase Earn, Coinbase Prime, and Coinbase Wallet services.
Brian Armstrong, Co-Founder and CEO of Coinbase, said the exchange received permission from the SEC to go public two years ago when the regulator thoroughly reviewed all of the platform’s assets and services. Armstrong called the regulator’s current threats odd because the SEC didn’t name a single specific problem with any of the assets on Coinbase as part of its investigation.
Armstrong also opined that the SEC’s current actions were directly related to a petition Coinbase wrote in defense of cryptocurrency staking services, in which crypto exchange reps claimed that the regulator simply didn’t understand crypto products, assets, and services. The petition was written in February 2023, right after the SEC shut down Kraken’s crypto staking program.
Representatives of the cryptocurrency exchange claim that all Coinbase products and services continue to operate as normal. According to Coinbase’s CEO, the exchange is ready to respond to the SEC’s “legal threats” in court to provide the crypto industry with regulatory clarity that is currently lacking. Armstrong accused U.S. regulators of failing to come to a common denominator in regulating the crypto market. “Imagine you’ve got both football and soccer refs on the field, but we’re actually playing pickleball. The refs can’t really agree on the rules of this new game,” Armstrong states, once again alluding to the incompetence of regulators regarding the cryptocurrency market.
The community also accused the SEC of inconsistency. In their view, “approving business lines and disclosures” of the cryptocurrency exchange and a year later “suing on numerous core, basic business lines that were disclosed is absolutely absurd,” to say the least. The regulator’s actions against Coinbase also led the community to wonder: “what is the actual point of the SEC?”
Recall that earlier, representatives of the blockchain industry and U.S. politics accused the SEC of exceeding its authority, citing the lack of legal rights to regulate the crypto market.
