Coinbase in turmoil, the cryptocurrency world trembles again

• The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Coinbase, one of the largest cryptocurrency exchanges
• Regulator accuses him of breaking securities law by acting as an unregistered broker
• Paul Grewal, Chief Legal Officer of Coinbase, responded to the complaint by saying that the SEC’s approach, based solely on law enforcement, hurts the economic competitiveness of the United States and companies like Coinbase.

After months of suspense, the United States Securities and Exchange Commission (SEC) eventually filed a lawsuit against Coinbase, one of the largest players in the cryptocurrency industry in the United States. The US regulator accuses Coinbase and its parent company, CGI, of violating securities law by acting as an unregistered broker for its main cryptocurrency trading platform, its Coinbase Prime product and the Coinbase Wallet.

The SEC complaint also points out that Coinbase never registered its staking program as a servicethereby depriving investors of critical protections, including rules that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and regular review by the commission.

The SEC also cited 13 tokens that Coinbase has made available for trading, claiming that they are offered and sold as investment contracts, and therefore as securities. Among them are tokens for Solana (SOL), the game Axie Infinity (AXS), the blockchain Polygon (MATIC), the virtual world The Sandbox (SAND), and the token “Chiliz” (CHZ) operated by the token company. of Socio fans.

“We allege that Coinbase, despite being subject to securities laws, illegally mixed and offered exchange, brokerage and clearing functions” explained for his part Gary Gensler, chairman of the SEC. He declares :

Coinbase’s alleged failures strip investors of critical protections, including rules that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and regular SEC inspection. Additionally, as we allege, Coinbase never registered its staking program as a service, once again depriving investors of critical disclosures and other protections.

The Alabama Securities Commission also issued a “show cause order” to Coinbase on Tuesday morning, indicating that the action is the result of a multi-state task force comprising ten securities regulators from the states of Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin. This order requires Coinbase to respond within 28 days to explain “why she shouldn’t be ordered to cease and desist from selling securities not registered in Alabama”.

Coinbase was warned

Coinbase responded to the complaint through its chief legal officer, Paul Grewal, who said the SEC’s enforcement-only approach is hurting the economic competitiveness of the United States and businesses. like Coinbase who have demonstrated their commitment to compliance. He added that the solution is legislation that allows for the development of fair rules of conduct in a transparent manner and their fair enforcement, not the implementation of legal action.

In March, the SEC sent Coinbase a “Wells Notice” indicating upcoming enforcement action. In response, Paul Grewal had written in a blog that “Coinbase does not list securities or offer products to our customers that are securities…”. And to add:

We remain confident in the legality of our assets and services, and if necessary, we welcome legal process to provide the clarity we have been calling for and to demonstrate that the SEC simply has not been fair or reasonable in its commitment to digital assets.

The filing of the lawsuit comes a day after the SEC sued Binance, the world’s largest cryptocurrency exchange, claiming it operated illegally in the United States. According to Reuters, data firm Nansen has detected more than $790 million withdrawn from Binance and its US affiliate since the complaint was filed.

In an interview aired on Bloomberg, the SEC Chairman questioned the value of tokens, saying that cryptocurrency firms operate in “a Wild West, with a bunch of casino operators”. The long-term implications of these complaints against Coinbase and Binance could be dramatic for the cryptocurrency world as the market struggles to recover from the 2022 crypto crash.