Experts says Coinbase SEC probe could have mixed effects
July 29, 2022 2:07 AM
An investigation reportedly embarked by the Securities and Exchange Commission( SEC) into Coinbase’s alleged trading of unregistered securities could have a “ weighty and chill effect ” on crypto exchanges and token systems, according to a legal expert.
Michael Bacina, an Australian digital assets attorney with Piper Alderman while speaking with Cointelegraph that the impact on exchanges and systems may happen whether or not the tokens are eventually said to be securities.
“ Given the numerous tokens that the SEC has called securities in their insider trading pursuance are listed and trading on Coinbase and other exchanges, this probe could have a weighty and chill effect for both those exchanges and the token systems, whether or not an ultimate finding is the tokens are or aren't securities. ”
According to a Bloomberg report on Monday which quoted sources saying the crypto exchange is facing an SEC probe into whether it wrongly allowed U.S. investors to trade assets that should have been registered as securities on the exchange.
The report quoted three people “ familiar with the matter ” as articulating that the probe is being oversaw by the Securities and Exchange enforcement unit. It's different from its investigation into an alleged insider trading scheme.
Bacina noted that Coinbase “ could face really substantial penalties ” or potentially be needed to register as an exchange in the U.S. as a result of the probe.
Meanwhile, he also noted that “ given they've correctly linked crucial compliance incompatibilities between blockchain systems and being in U.S. market regulations, it may be problematic , if not insolvable, for their current business model to be as a accredited and registered exchange. ”
“ This act by the SEC wouldn’t appear aligned with encouraging pro-active industry engagement; Coinbase has a history of good faith engagement on regulatory subjects and has pointed the SEC has audited their token checklist criteria. ”
“ The formal way to advance the innovation blockchain and crypto can bring is with a crystal engagement between regulators and the industry, and clear guidance being put out," Becina added. While he also mentioned that:
“ A CFTC Commissioner has correctly called this" regulation by enforcement" and it’s not an ideal way to give guidance or transparency to a fast growing and developing industry. ”
Coinbase has continued to reject it had listed any securities.
Paul Grewal, the lead legal officer of Coinbase said on July 25 to his Twitter followers that he's “ assured ” in the platform’s “ strict diligence process ” which keeps securities off its system.
He also reshared a blog post he wrote named “ Coinbase doesn't list securities. End of Story," which was first issued on July 22.
The news of the probe on Monday synchronized with a fall in Coinbase Global Inc's share price, which stumbled 21% overnight, according to data from NASDAQ. the news prompted Ark investment owned by Cathie Wood, to dump roughly 1.4 million Coinbase shares (COIN) valued at an estimated $75 million as of July 28 market price.