Cryptocurrency exchange Coinbase has revealed that the Securities and Exchange Commission (SEC) has informed the firm they may be the next exchange to receive enforcement action over alleged unregistered securities on its site.
Coinbase confirmed the news late last Wednesday and would become the latest crypto company to fall under the US financial regulator’s crackdown on unregistered securities – a financial instrument that is unregulated by the SEC – which they believe are cryptocurrencies circulating across various exchanges.
The wells notice Coinbase received detailed that future action against the company could occur, which may include a cease and desist letter or an injunction dependent on the violation the exchange has allegedly committed.
Paul Grewal, Chief Legal Officer at Coinbase, stated: “If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets. Until then, it’s business as usual.”
Despite the wells-notice only being an early warning with no action potentially needed, this is another intensified attempt by the SEC to seize control over many unregulated exchanges operating in the US.
The financial watchdog is currently embroiled in a battle with Ripple Labs over its XRP cryptocurrency, a court case Coinbase filed a motion to support Ripple against the SEC last summer.
Coinbase also had its own dealings with the SEC after the regulator made an investigation into the crypto firm over believed unregistered assets, which in turn, made shares in Coinbase drop 21% during the opening months of last summer’s ‘crypto winter’.
Now Coinbase has until 29 March to respond to the well-notice to dispute the allegations. The company’s shares dropped 11% upon yesterday’s news and the crypto firm have in the past criticised the SEC over an unclear regulatory structure when it comes to governing crypto.
The statement released by Coinbase outlined that “the SEC will not let crypto companies ‘come in and register’ – we tried”, and further reveals that the company will defend its name against such accusations.