(CTN News) – According to reports, Coinbase could face an SEC probe into whether it is offering unregistered securities.
This year, Coinbase stock has lost over 77% of its value.
A source told CNBC that the SEC is investigating whether the company illegitimately lets users trade digital assets that are not registered as securities. Bloomberg reported the news earlier.
“I’m happy to say it again and again: we’re confident that our rigorous diligence process keeps securities off our platform,” said Coinbase’s chief legal officer Paul Grewal on Twitter. “We look forward to engaging with the SEC on this matter.”
Coinbase shares dropped more than 15% Tuesday after SEC probe report
SEC probe reportedly happened before Coinbase’s alleged insider trading scheme that led to fraud charges Thursday against an ex-Coinbase product manager and two others.
Nine of the 25 tokens allegedly traded in the scheme were securities, according to an SEC complaint filed the same day.
Cryptocurrency token classification is controversial. Cryptocurrencies are generally governed by the Commodity Futures Trading Commission if they are commodities (like other kinds of currency).
Nevertheless, many crypto projects are funded by the sale of speculative tokens. According to SEC Chair Gary Gensler, many underlying tokens are securities, so they need to be regulated as such.
“A digital token or cryptocurrency asset is a security if it meets the definition of a security, which the Securities Act defines to include ‘investment contract’, i.e., if it represents an investment in a common enterprise with a reasonable expectation of profit.”
San Francisco-based Ripple is also facing SEC lawsuits.
Coinbase’s token listings are more selective than Binance’s and FTX’s. According to CoinGecko, Coinbase lists over 200 such tokens.
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