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In what could be a defining case for the crypto industry, the Securities and Exchange Commission (SEC) has charged Coinbase, the largest digital asset exchange in the US, with violating the nation’s securities laws.<\/p>\n
The SEC allegations<\/a> that Coinbase has been operating as an exchange, broker, and clearinghouse without the necessary approvals from the agency. The complaint comes just a day after the SEC charged<\/a> Binance, the world’s largest crypto exchange, with similar violations.<\/p>\n Brian Armstrong, Coinbase’s CEO, answered<\/a> to the charges on Twitter, emphasizing that the SEC cleared the company to go public in 2021 after reviewing its business operations. “There is no path to ‘come in and register’ – we tried, repeatedly,” Armstrong said. \u201cWe don’t list securities.\u201d<\/p>\n The SEC’s move comes as no surprise \u2014 in March, Coinbase Received<\/a> a Wells Notice, a communication from the SEC that typically precedes enforcement action.<\/p>\n While yesterday’s action against Binance sent crypto markets reeling, today’s announcement hasn’t fazed investors. In fact, Bitcoin and Ether are up nearly 4% since the news broke, and have nearly recovered yesterday’s losses.<\/p>\n Coinbase shares were hit harder \u2014 COIN is down over 10% on the day.<\/p>\n Earlier this year, Coinbase called for American voters to make their voices heard through a grassroots effort<\/a> to elect public officials who support the digital asset industry, in light of ongoing regulatory pressure.<\/p>\n The SEC also specifically called some digital assets securities. These include Solana’s SOL, Cardano’s ADA, and Polygon’s MATIC, each of which has a market capitalization of well over a billion dollars.<\/p>\n The SEC’s complaint also alleges that Coinbase’s staking service constitutes an investment contract and is, therefore, a security.<\/p>\n Staking generally refers to locking up digital assets in order to support a blockchain’s operations and earn a yield. Since running a node can be technically challenging for the average user, staking services like Coinbase’s stake assets on users’ behalf in exchange for 15-35%<\/a> of yield.<\/p>\n In response to recent regulatory pressure, Coinbase<\/a> and other American exchanges, like Gemini, have established off-shore presences this year. Kraken shut down its staking services<\/a> earlier this year and paid a $30M fine in order to settle charges levied by the SEC.<\/p>\n<\/div>\nSecurities Labeling<\/h4>\n