The United States has charged the country’s largest cryptocurrency trading platform with operating unlawfully, broadening its crackdown on the industry.
According to the Securities and Exchange Commission, Coinbase worked as a broker, exchange, and clearing agency for SEC-regulated investments without legally registering.
According to the regulator, this allowed the corporation to avoid oversight, including safeguards against conflicts of interest.
Coinbase stated that the guidelines were unclear.
“The solution is legislation that allows for fair road rules to be developed transparently and applied equally, not litigation,” said Paul Grewal, Coinbase’s chief legal officer. “In the meantime, we’ll continue to operate our business as usual.”
The complaint against Coinbase comes a day after the SEC filed a lawsuit against Binance, the world’s largest crypto trading platform, accusing the company of mishandling user assets, falsely exaggerating trade volume on the site, and attempting to avoid US regulation.
Authorities have committed to more actively control the industry using current legislation, noting that many crypto assets function similarly to other investments that are subject to oversight.
Following last year’s dramatic collapse of another major exchange, FTX, which left many clients unable to access their assets, efforts to tighten oversight have increased.
“As alleged in our complaint, Coinbase was fully aware of the federal securities laws’ applicability to its business activities, but deliberately refused to follow them,” said Gurbir S Grewal, director of the SEC’s division of enforcement.
“You simply cannot disregard the rules because you dislike them or would prefer different ones: the consequences for the investing public are far too severe.”
Coinbase, which was founded in 2012, claims to have over 100 million customers and daily trading volumes of billions of dollars in digital assets such as Bitcoin.
When the company went public on the stock exchange in 2021, it had a market value of about $100 billion.
However, Coinbase shares have plummeted since crypto prices plummeted last year. Its current value is less than $12 billion.
The company’s stock dropped more than 14% after the case was filed in federal court in New York.
Coinbase had previously warned that the SEC might take legal action against the company. It termed the development unfortunate at the time and stated that it had been working with authorities to try to register, but that there was no clear method for crypto companies to do so. It has also threatened to relocate outside of the United States, maybe to London or elsewhere.
Mr Grewal stated on Tuesday, “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have demonstrated a commitment to compliance.”
The CEO of the Blockchain Association, an industry group, cited ongoing congressional talks as proof that regulations governing the field are in flux and that the SEC did not have a case.
Mr Grewal was scheduled to appear in Washington at a hearing about developing laws to govern certain sorts of digital assets on the same day the SEC launched its claim against Coinbase.
“The SEC does not make the law; it only makes accusations,” said Blockchain Association CEO Kristin Smith. “We’re confident the courts will prove [SEC chairman Gary] Gensler wrong in due time.”
