Crypto trading platform Coinbase is facing a fresh probe from the US Securities and Exchange Commission (SEC) over allegedly listing unregistered securities.
Per a Bloomberg report, the largest U.S.-based cryptocurrency trading platform, Coinbase, has boosted its token offerings in the recent past. This has triggered SEC to investigate whether the exchange has prompted Americans to trade tokens that should have been registered as securities, two sources familiar with the matter said.
Probe predates insider trading lawsuit
The recent probe by the SEC’s enforcement unit predates last week’s investigation into insider trading charges against a former Coinbase product manager and two others.
The accused perpetrated a scheme to trade ahead of multiple announcements regarding certain crypto assets that would be made available for trading on the Coinbase platform, SEC’s announcement read.
However, Coinbase firmly stated that the company “does not list securities. Period.”
Paul Grewal, Chief Legal Officer at Coinbase, noted last week that seven of the nine digital assets claimed by the SEC are listed on Coinbase. He continued,
Coinbase also questioned SEC by filing a petition to state a workable regulatory framework for digital asset securities clearly.
Coinbase has been facing scrutiny from the regulator, and the firm noted in its first-quarter earnings report that it had received “investigative subpoenas from the SEC.”
The regulator had demanded “information about certain of our customer programs, operations, and intended future products, including our stablecoin and yield-generating products,” it noted.
Securities – as opposed to other assets like commodities – are strictly regulated and require detailed disclosures to inform investors of potential risks.
In 2017, the then SEC Chair Jay Clayton warned crypto exchanges that many of their digital assets qualified as securities and therefore require registration under federal securities laws. However, in 2018, Clayton clarified in an interview with CNBC that cryptos are “commodities rather than securities.” This includes digital assets such as bitcoin (BTC), ether (ETH), and litecoin (LTC).
However, the SEC has not clarified which coins fall under securities, and crypto platform operators are looking for a clear digital-asset rule to avoid listing unregulated assets.
