The US Security and Exchange Commission (SEC) has sued Coinbase for violating rules related to services it has offered as securities. According to the suit filed at the New York court today, Coinbase combines “three functions that are typically separated in traditional securities markets – those of brokers, exchanges, and clearing agencies” but has never registered with the SEC as either “a broker, national securities exchange, or clearing agency.”
The SEC said that this act violates the disclosure regime established by Congress concerning the Us securities market. In addition, the SEC noted that the crypto exchange has also exposed all its customers to significant risk because of their lack of registration with the authorities.
Coinbase is a popular cryptocurrency exchange platform and digital wallet provider founded in 2012 in San Francisco. It provides a secure platform for cryptocurrency transactions and offers additional services such as Coinbase Pro, Coinbase Wallet, Coinbase Custody, and Coinbase Commerce. It has gained popularity and is considered one of the leading cryptocurrency exchanges in the industry.
“By collapsing these functions into a single platform and failing to register with the SEC as to any of the three functions, and not having qualified for any applicable exemptions from registration, Coinbase has for years defied the regulatory structures and evaded the disclosure requirements that Congress and the SEC have constructed for the protection of the national securities markets and investors,” SEC said.
Coinbase operated Coinbase Prime and Coinbase Wallet illegally
The SEC also added that Coinbase operated its Coinbase Prime, an integrated platform that provides institutions and corporate bodies with trading, custody, and prime services; and Coinbase Wallet, its self-custody service for users, without approval from the authorities. The services have involved several securities which should be under the guidance of the securities laws.
Coinbase is also sued for carrying out marketing on its website as well as on social media about its services, and has for years “touted its efforts to analyze crypto assets under the standards outlined in Howey before making them available for trading.”
SEC probing crypto exchanges
This is not the first time the crypto firm has fallen out with the SEC, nor is Coinbase the first to experience such allegations. Yesterday, June 6, 2023, Binance was sued by the SEC as well for breaking similar laws related to the US market.
In a previous response to the harsh activities of the SEC against crypto exchanges, Coinbase has announced its expansion outside the US to provide services in countries with clear and favorable crypto laws
Read also;
Coinbase set to launch Bitcoin and Ether futures contracts
Adam Draper thinks Coinbase is the best 5-year investment
