The Securities and Exchange Commission (SEC) has issued a Wells Notice to cryptocurrency exchange Coinbase, according to a statement released by the exchange.
A Wells notice usually precedes an enforcement action and Coinbase believe that these claims relate to an unspecified portion of their listed assets, their staking service Coinbase Earn, Coinbase Prime and the Coinbase Wallet. The SEC claims that some or all of these products are securities that must be registered with the agency. In response, Coinbase has pushed back against the SEC's characterisation, arguing that their staking services should not be subject to securities laws and that the agency has provided little by way of guidance on how to determine which cryptocurrency products are securities.
In February, Kraken agreed to shut down their U.S. cryptocurrency staking service and pay in excess of $30 million in penalties following their settlement with the SEC. Earlier this week, the SEC charged cryptocurrency entrepreneur Justin Sun for conducting fraudulent activity, whilst also accusing various celebrities with illegally promoting his products.
In the midst of these recent events, Coinbase have demonstrated a great sense of confidence and conviction in the regulatory certainty of their services, stating that it is “business as usual” at Coinbase.
Co-Founder and CEO, Brian Armstrong also stated that the SEC had reviewed their business model in detail and approved Coinbase’s Nasdaq debut just two years prior. Fast forward to today, and the exchange’s stock price is tumbling as securities charges may be looming.
Coinbase published a blog post detailing its interactions with the SEC over their products. The exchange claims that it has been in regular communication with the SEC about their lending products, and that the agency has not provided clear guidelines for how it should be regulated.
“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," said Paul Grewal, Coinbase's Chief Legal Officer.
The commendable blog post also details Coinbase's efforts to work with regulators and lawmakers to develop reasonable rules for the industry. Grewal added, “tell us the rules and we will follow them. Give us the actual path to register, and we will register the parts of our business that need registering. In the meantime, the U.S. cannot afford for regulators to continue to threaten the good actors in the crypto industry for doing the same legal and compliant things they’ve always done”.
It will be interesting to see how this one develops over the coming weeks and months.
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