The SEC is investigating Coinbase

Bloomberg revealed today that the SEC is investigating Coinbase.

SEC Accuses Coinbase of Securities Listing

Bloomberg cites “three people familiar with the matter” who say the SEC is investigating whether Coinbase listed digital assets on its exchange that should have been registered as securities.

In the US, as in other parts of the world, assets defined as a "security" can only be traded upon mandatory registration of the security with the SEC. The agency is investigating whether any of the cryptocurrencies and tokens listed on Coinbase may fall under this definition. 

The first cryptocurrency to receive such attention from the SEC is XRP, which led to a lawsuit filed by the agency against Ripple specifically because it was accused of selling securities without prior registration.

Coinbase removed XRP from tradable cryptocurrencies a long time ago, but the exchange has been significantly expanding its offering of tokens and cryptocurrencies for several months. Coinbase's head of legal, Paul Grewal, this news he commented saying that they are confident that their rigorous due diligence process will "keep securities off our platform".

The company published an article on its official website titled “Coinbase does not list securities. End of the story". However, it is extremely unlikely that the SEC will settle for one blog post that will sweep away all doubt.

In part because, as Bloomberg reports, US politics appear to be increasingly pushing regulators to do more to oversee the cryptocurrency sector. Recently, SEC Chairman Gary Gensler also said that cryptocurrency trading platforms should do more to protect retail investors.

Currently, Coinbase has many dozens of cryptocurrencies and exchangeable tokens, and it seems likely that among all of them there are some that are at risk of being considered a security. However, if their due diligence process for selecting assets to list were truly effective, then it is possible that there may not be any security among the cryptocurrencies listed.

It's important to stress that this is only an investigation so far, so no actual charges have been laid yet. In other words, for now, and until proven otherwise, Coinbase appears to be working in accordance with US regulations.

What's more, if the SEC were to consider any cryptocurrency listed by Coinbase as a security, the problem would spread like an avalanche to many other exchanges. Note that Coinbase's stock price on the exchange is down 73 % since the start of the year, but is up 18 % in the past week. But yesterday it fell 5.3 % after these rumors spread. 

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.