U.S. SEC has threatened to sue Coinbase

The Securities and Exchange Commission has informed Coinbase Global Inc. that it intends to initiate enforcement action against the business, intensifying its campaign against cryptocurrency companies by focusing on the largest U.S. exchange, Coinbase reported on Wednesday.

According to Coinbase, it was informed by the SEC via a letter known as a Wells notice that the company may have violated investor protection rules. The SEC’s commissioners must approve any legal actions or agreements regarding enforcement for the notice to be considered official.

As the business disclosed on Wednesday that the SEC had issued it a Wells notice shares of Coinbase fell over 13% to $67.33 in extended trade.

Since its creation in 2012, Coinbase has been a major player in the markets for digital currencies. The business has listed some of the most well-known digital assets on its exchange and has assisted in bringing tens of millions of new users into the market.

The notification covered multiple areas of Coinbase’s operations, including assets listed on its cryptocurrency exchange, its staking tool Coinbase Earn, and its wallet service, the firm said.

Through the staking process, in which cryptocurrency investors lock up their coins to facilitate transactions on the underlying blockchain network, customers can earn rewards on their digital assets through the Coinbase Earn program. Users’ digital tokens are stored in a cryptocurrency wallet.

Coinbase Chief Legal Officer Paul Grewal stated, “We are ready for this disappointing outcome and confident in the legality of our assets and services. “If necessary, we welcome a legal procedure to give the clarification we have been promoting and to show that the SEC has blatantly been unfair or unreasonable in its engagement on digital assets,” the statement continued.

A spokesperson for the SEC declined to comment.

As authorities can ask for injunctions to stop the corporation from engaging in actions they claim are illegal, an SEC complaint against a cryptocurrency exchange might have existential repercussions. Despite a long-running crackdown on cryptocurrency purchases and trading, the SEC has only sued a small number of exchanges.

Brian Armstrong, the CEO of Coinbase, discussed the shift in the SEC’s attitude towards his firm over the previous two years in a statement he sent on Twitter late on Wednesday. He said that after looking over its disclosures, which “clearly outlined our asset listing procedure and contained 57 references to staking,” the SEC approved Coinbase’s IPO in 2021.

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Three days before Mr. Gensler was sworn in as SEC head, on April 14, 2021, Coinbase shares made their debut on stock exchanges. Although the SEC pursued larger firms after Mr. Gensler took president, the agency pursued enforcement proceedings against cryptocurrency startups under the Trump administration.

I am Vishal. I post articles about the cryptocurrency markets. I'm pursuing a BBA degree. My home is in Navi Mumbai, Maharashtra.I'm constantly interested in new advancements in this industry and I learn something new about it every day. I would love to share such information with you all.

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