The U.S. Securities and Exchange Commission (SEC) has announced that it has filed a lawsuit against major U.S. cryptocurrency exchange Coinbase.
The SEC notes that Coinbase’s “staking-as-a-service” is an offering of securities. They also questioned the company’s provision of trading, brokerage and clearing services without being registered with the SEC.
The SEC also said that by operating unregistered with the SEC, it did not have sufficient investor protection measures. He pointed out that SEC investigations, record keeping, and protections against conflicts of interest were inadequate for Coinbase’s business.
The “staking as a service” that the SEC sees as a problem is the so-called staking service. In a press release, the SEC explains that it is a “Proof of Stake (PoS) mechanism and service that allows customers to benefit from Coinbase’s efforts.”
What is staking
Mechanisms and services that provide rewards for depositing virtual currency for a specified period of time. By depositing virtual currency, you can contribute to the operation of the blockchain network and receive rewards in return.
connection: “Why should staking services be excluded from securities certification?” US Coinbase filed a petition with the SEC
SEC Chairman Gensler commented on the provision of services such as trading without being registered.
Despite being subject to the Securities Act, Coinbase performed all trading, broker-dealer and clearing functions. In the securities market, these functions are performed separately.
By not registering with the SEC, we failed to provide rules to prevent fraud and manipulation, to properly disclose information, to protect against conflicts of interest, and to conduct regular SEC investigations.
The SEC’s Director of Regulatory Enforcement also claimed that Coinbase was aware that securities laws might apply to its business, but that it deliberately refused to comply.
In the complaint, the SEC cites the following securities as examples of securities, and also points out that Coinbase provided cryptocurrency trading services as an investment contract.
- Solana (SOL)
- Ada (ADA)
- Polygon (MATIC)
- The Sandbox (SAND)
- Chillies (CHZ)
- Internet Computer (ICP)
- dash (DASH)
Chairman Gensler appeared on CNBC’s “Squawk on the Street” on the 6th. He said there he said, “We don’t need digital currency anymore.”
He claims that fiat currencies such as the US dollar, euro, and yen have already been digitized. He also believes that digital investments are already available.
connection: What is the virtual currency exchange Coinbase | Information and points to note for investors
Coinbase was expected to be sued by the SEC due to Wells’ prior notice. The company has clearly shown its willingness to fight with the SEC, and in the financial results announcement for 1Q 2023 (January to March), it is expected that costs will increase in 2Q 2023 (April to June) due to the cost of litigation. explains that there are
connection: U.S. SEC investigates Coinbase on suspicion of violating securities laws Sends Wells notice
The company’s CEO Armstrong announced a comment on the 7th that the SEC actually took the lawsuit. He will represent the industry in court and reiterate that he will bring clarity to crypto regulation.
Armstrong pointed out inconsistencies such as the fact that the SEC has already reviewed Coinbase’s business when authorizing Coinbase’s stock listing. He accused the SEC of enforcing regulations without providing clear rules, harming the United States. And he comments as follows.
Let’s build crypto as an industry and move forward during the trial. Eventually the United States will come to the correct understanding.
Regarding the SEC complaint against us today, we’re proud to represent the industry in court to finally get some clarity around crypto rules.
1. The SEC reviewed our business and allowed us to become a public company in 2021.
2. There is no path to “come in and…
— Brian Armstrong 🛡️ (@brian_armstrong) June 6, 2023
The SEC sued Binance on the 5th and Coinbase on the 6th. Bitcoin (BTC) price rose more than 5% over a 24-hour period, partly due to the anticipated Coinbase lawsuit. Meanwhile, Coinbase stock is down more than 7% from the previous day.
connection: The SEC’s Binance lawsuit causes the virtual currency to plunge to the $25,000 level.