The United States Securities and Exchange Commission (SEC) has continued its clampdown on the crypto industry as it has now sued Coinbase, America’s first publicly traded cryptocurrency exchange.
According to a press release from the regulator, while the firm operated as a broker, exchange, and clearing agency, it failed to register these services properly. The regulators alleged that this act enabled the firm to evade supervision, which included measures to prevent conflicts of interest.
Likewise, the SEC alleges that Coinbase’s lending product, which allows users to earn interest on their cryptocurrency holdings, qualifies as a security. In response to the SEC’s lawsuit, Coinbase has said the rules were unclear and the solution is therefore to provide proper legislation that can be applied fairly across the board rather than litigation. It also added that it would continue its operations as usual.
The San Francisco-based exchange disputes this claim and says that its product is not a security. The exchange has also said that it has been in talks with the SEC for months and has been transparent about its plans.
SEC Continues Clampdown on Crypto Industry
Moreso, the lawsuit against Coinbase comes a day after the SEC filed a complaint against cryptocurrency exchange Binance and its Chief Executive Officer (CEO) Changpeng Zhao, alleging that it has been operating without proper registration and has failed to comply with US securities laws.
Recall that in March, the United States regulator started investigating Coinbase and issued a Wells Notice to the firm. The Wells Notice pointed at services like the company’s exchange, its staking service, Coinbase Earn, and Coinbase Wallet. However, Coinbase CEO Brian Armstrong said he is ready at any time to defend his stance in court if the need arises.
Just last month, the exchange was dragged into another lawsuit filed by Adam Grabski. The lawsuit claims that Coinbase executives engaged in insider trading by selling millions of dollars worth of stock just months after the company went public.
Meanwhile, the lawsuits against players in the industry have sparked concerns among cryptocurrency investors and industry experts about the regulatory landscape for digital assets. Some fear that the SEC’s actions could stifle innovation and growth in the industry, while others believe that increased regulation is necessary to protect investors.
