This week, the US Securities and Exchange Commission (SEC) charged Coinbase, Inc., a well-known US-based exchange, as part of its ongoing campaign against cryptocurrency exchanges.
The SEC charged Coinbase with operating its platform without being properly registered as an exchange, broker, or clearing agency, according to a news statement. The unregistered offer and sale of securities in connection with the exchange’s staking-as-a-service business also resulted in charges. Notably, the complaint did not name any officials from Coinbase.
Gary Gensler, the chairman of the Securities and Exchange Commission, stressed that Coinbase had illegally integrated exchange, broker-dealer, and clearinghouse operations, which are generally distinct in other areas of the securities markets. Gensler emphasized that breaking the law out of personal preference may have negative effects on the investing public. In agreement with this, Gurbir S. Grewal, the head of the SEC’s Division of Enforcement, charged Coinbase with willfully violating federal securities laws.
13 cryptocurrencies, including SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO, were also included as securities in the SEC’s lawsuit. In the SEC’s case against Binance that was only filed the day before, some of these currencies were also listed as securities.
In reaction to the allegations, Coinbase’s Chief Legal Officer, Paul Grewal, voiced his displeasure with the SEC’s enforcement-focused strategy and emphasized the need for unambiguous guidelines and regulations that support honest and open industry norms. Grewal reiterated Coinbase’s pledge to go on as normal and called for further regulatory certainty.
The legal issues facing Coinbase go beyond the most recent SEC allegations. The exchange was informed by the SEC that it is preparing to propose formal charges to its commission members in March through a Wells notice. Gary Gensler, the chair of the SEC, has consistently urged cryptocurrency exchanges to register, citing issues with conflicts of interest in the sector.
The SEC is continuing to tighten down on cryptocurrency exchanges as seen by its moves against Coinbase and Binance. Participants in the sector anxiously anticipate the creation of precise regulations and laws that support just and equitable practices as the regulatory environment changes.