Coinbase Under SEC Probe, Stock Tumbles


Coinbase is under scrutiny today, as it was announced this morning that the company is under investigation by the Securities and Exchange Commission. Specifically, they are questioning whether or not certain digital assets should have been registered as securities.

According to Coinbase's Chief Legal Officer Paul Grewal, "Coinbase does not list securities. End of story." He published this post to Coinbase's website on July 21, in light of a recent Department of Justice investigation into a former employee who allegedly misused confidential company information regarding listing decisions.

What appears to be going on here is a broader ongoing legal battle to bring about more regulations to cryptocurrencies, specifically the exchanges on which they trade. Coinbase CEO Brian Armstrong has stated that the exchange is the most regulatory compliant exchange. They regularly reach out to lawmakers to ensure best practices are in place. In April of this year, the company rolled out new tools for individual customers and businesses to quell regulatory concerns. The Know Your Transaction (KYT) enables traders to safely transact on the exchange.

The company themselves state:

Coinbase is required to comply with many financial services and consumer protection laws, including: The Bank Secrecy Act, which requires Coinbase to verify customer identities, maintain records of currency transactions for up to 5 years, and report certain transactions.

In August 2020, the company hired Janice Payne -- a graduate of Boston University School of Law -- as Director of Regulatory Compliance. Clearly, Coinbase is being proactive in abiding with lawmakers and regulators.

As you may have guessed, the news wasn't exactly welcomed by investors - it is now trading down about 14% on the day.

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This isn't the first time that the exchange has been under the investigation and certainly won't be the last. The company has clearly laid out such potential regulatory investigations as a risk factor in their prospectus. As the cryptocurrency industry develops, more rules are sure to come to ensure individual protections. It's pretty much to be expected and I believe that coinbase will comply with whatever requests the SEC makes. After all, they want to maintain their business and reputation. 

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dot com boomer - writing mostly on crypto, stocks, entertainment, etc.


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