After Binance, SEC sues American crypto exchange Coinbase
Coinbase, one of the leading crypto trading platforms across the globe, has been sued by the US SEC for operating illegally.
cryptocurrency
Highlights
- Coinbase has been sued by the Securities and Exchange Commission on Tuesday in New York
- It is alleged that the crypto firm broke the regulator's rule
A day after filing a lawsuit against Binance, the US Securities and Exchange Commission widens its crypto crackdown as it sued Coinbase, a leading US cryptocurrency platform on Tuesday.
The SEC accused the crypto firm of operating illegally because it failed to register as an exchange and violated the regulator's rule by allowing its users to trade numerous crypto tokens which were unregistered securities.
Today we charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and for failing to register the offer and sale of its crypto asset staking-as-a-service program.https://t.co/XPG2gDkxtV pic.twitter.com/hCdVMw8B2v
— U.S. Securities and Exchange Commission (@SECGov) June 6, 2023
Coinbase violates SEC’s rules
In fact, as per reports Coinbase was under SEC investigation. The regulator alleged in the federal court that the crypto platform used its “staking" service that lets customer turn over their crypto tokens to facilitate transactions on a blockchain -- which further then pays a return to these users. This is in violation of the SEC's rule.
In the words of Gurbir S Grewal, director of the SEC's division of enforcement, "As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them.”
On the other hand, Coinbase stated the absence of clarity of rules. "The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation," mentioned Paul Grewal, Coinbase's general counsel. "In the meantime, we'll continue to operate our business as usual."
Interestingly, the SEC’s crackdown on Coinbase comes a day after the SEC sued Binance, the largest crypto trading platform in the world. The financial watchdog had accused the company of mishandling customer funds, artificially inflating trading volumes as well as taking steps to dodge US regulation.
Crypto industry: A ‘Wild West’
Both the civil cases (i.e., of Binance and Coinbase) are a part of Gary Gensler, SEC Chair’s push to assert jurisdiction over the crypto industry. He again labelled the crypto industry as a ‘Wild West’ on Tuesday, which has undermined investors’ trust in the US capital markets.
This presents an opportunity to redefine and transform the crypto industry under a regulatory framework. It should provide the long-awaited clarity on the classification and definition of crypto activities, including exchanges, broker services, the classification of tokens (altcoins), and investment products such as staking. In the long run, this will boost investor confidence among those seeking crypto as an alternative investment. Additionally, it will aid in removing bad projects and scam tokens from the industry.
The regulating agencies have vowed to police the crypto industry more aggressively using existing rules, stating that several crypto assets function like other investments which are subject to oversight.
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