The US Securities and Exchange Commission (SEC) has issued a warning to Coinbase, a popular cryptocurrency exchange, indicating that it could face enforcement action for selling unregistered securities.
According to Coinbase management, the SEC’s notice pertains to an unspecified portion of digital assets, specifically the Coinbase Earn and Coinbase Prime programs, as well as the Coinbase Wallet wallet.
Coinbase has been given an opportunity to provide explanations and challenge the allegations. Failure to do so could result in a lawsuit, injunctions, and penalties against the listed Coinbase services.
Despite this, Coinbase maintains that the crypto assets traded on its platform are not securities and that they undergo rigorous background checks before listing.
The company’s General Counsel, Paul Grewal, pointed out that Coinbase’s programs are significantly different from those offered by Kraken, a cryptocurrency exchange that also faced SEC prosecution recently.
Kraken was forced to close its staking program and pay a $30 million fine. Coinbase’s CEO, Brian Armstrong, has stated that the exchange will continue to provide its products and services as usual because it is confident in the legality of its actions.
The company also welcomes litigation if it can bring clarity to the regulation of the industry. According to Grewell, this will show that the SEC’s position on digital assets is unfair and unreasonable.
Coinbase management is disappointed with the SEC’s approach to crypto assets, claiming that the exchange has been attempting to engage with the regulator in good faith.
However, it remains unclear how cryptocurrency exchanges should apply current regulations. It’s worth noting that this isn’t the first time Coinbase has drawn the SEC’s attention. Last year, the agency accused Coinbase of insider trading, but the exchange denied these allegations.