Amid its ongoing crackdown on crypto entities, the SEC issued an enforcement action Wells notice to Coinbase.
According to reports, Coinbase (NASDAQ: COIN) could face enforcement action from the US Securities and Exchange Commission (SEC) for securities law violations. Yesterday, the US regulatory agency issued a Wells notice to Coinbase warning of potential securities charges. In the notice, the SEC said it identified potential violations of US securities law and its intent to enforce action on the exchange.
Coinbase Reaction to SEC Enforcement Action Notice
However, Coinbase seems unperturbed by the looming SEC enforcement action. According to the leading crypto exchange, the Commission’s warning would not mean any changes to its current products or services. Coinbase also claimed that none of its listed assets were securities and ascribed the warning to a misunderstanding by SEC officials.
In a statement, Coinbase chief legal officer Paul Grewal said:
“If needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the Commission simply has not been fair or reasonable when it comes to its engagement on digital assets. Until then, it is business as usual.”
On the potential misunderstanding with the SEC, Grewal also stated:
“We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so.”
In addition, the Coinbase attorney explained that the Wells notice arrived after the exchange provided multiple proposals to the Commission. According to Grewal, even though these proposals were about registration, the SEC “ultimately” refused to respond to Coinbase’s petitions.
The American crypto exchange also noted in a filing to the regulatory agency that “the company believes these potential enforcement actions would relate to aspects of the company’s spot market, staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet. The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”
Coinbase’s shares slipped approximately 12% during the extended trading session after the news broke Wednesday. This decline adds to an 8.16% COIN fall sustained during the regular trading session.
Regulatory Crackdown on Crypto Players
The SEC notice is the second warning to a crypto entity, following February’s admonition to stablecoin issuer Paxos. Last month, the US regulator informed Paxos of its intention to sue for violating BUSD-related investor protection laws. According to the SEC, the blockchain company sold BUSD as an unregistered security.
Although Paxos remained mum on the development then, a Binance spokesperson weighed in on the impending lawsuit. According to the spokesperson, Binance merely licenses its brand for Paxos, with BUSD being a Paxos-issued and owned product.
The Paxos development and breaking Coinbase news are part of the SEC’s efforts to elicit compliance from crypto market participants. The regulatory agency previously settled with another crypto exchange Kraken following a crackdown on staking. Kraken paid $30 million to the SEC and agreed to discontinue its staking program in the US. Throughout the process, Kraken neither confirmed nor denied the SEC’s allegations.
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