Coinbase Products Under SEC Investigation
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An editor at Coincrop
23 Mar 2023 | 5 min read
he Securities and Exchange Commission is examining Coinbase for its wallet service, exchange activity, and Earn product. This inquiry comes on the heels of other regulatory warning shots sent to crypto firms in the United States as part of a string of investigations into different offerings from Coinbase. A Wells Notice was submitted to the company notifying them of these probes.
In a recent blog post, the company outlined changes to its exchange service and staking program as well as Coinbase Earn and Coinbase Wallet.
"Today, the SEC gave Coinbase a 'Wells Notice' regarding aspects of the company’s exchange, our staking service Coinbase Earn, and Coinbase Wallet after a cursory investigation," Coinbase remarked.
"Today’s Wells Notice does not provide a lot of information for us to respond to," the organization asserted. "The SEC staff told us they have identified potential violations of securities law, but little more."
Coinbase reassured that its products and services will continue as normal. Furthermore, a Wells Notice is simply an investigative document issued by the regulator; it does not necessarily intimate any pre-determined consequences or outcomes.
“We are prepared for this disappointing outcome and confident in the legality of our assets and services," Coinbase's Chief Legal Officer Paul Grewal released a statement, expressing his opinion. "If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets."
The blog post reveals the company has engaged in more than 30 meetings with the SEC over a period of nine months, yet their response continues to be unyielding. Furthermore, it was reported that an overwhelming majority (more than 90%) of assets seeking listing on this platform have been turned away.
Regulatory tensions have been growing as it pertains to staking, among other products. Recently, for instance, Kraken fell under the SEC's crosshairs concerning its staking-as-a-service program and had no choice but to stop offering those operations in the U.S, paying a hefty $30 million fine too.
The regulator filed charges against the company for selling unregistered securities as a result of their staking-as-a-service program. Despite this, Coinbase confidently proclaimed that its own activities in relation to staking are not breaching U.S. security law regulations.
"Staking is not a security under the U.S. Securities Act, nor under the Howey test, which the SEC uses to determine whether an investment contract is a security," Shortly after the SEC's resolution with Kraken, Grewal penned a post.
The relocation of the SEC serves as a reminder that crypto companies in America are facing even tougher times ahead. After several large-scale disasters caused investors to lose their money, it appears that the government is taking full responsibility and applying stricter regulations when it comes to passive investments. This move can only be seen as an effort on behalf of officials to protect people from future exploitation by unscrupulous entities.
MikeAn editor at Coincrop
Mike is a Coincrop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely putting his latest car project back together.
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