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In a startling turn of events, the Securities and Exchange Commission (SEC) has launched a significant legal action against Coinbase, Inc., one of the world’s most prominent cryptocurrency platforms. The charges include operating unregistered securities services and illegal activities related to its staking-as-a-service program.

Today we charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency and for failing to register the offer and sale of its crypto asset staking-as-a-service program.https://t.co/XPG2gDkxtV pic.twitter.com/hCdVMw8B2v

— U.S. Securities and Exchange Commission (@SECGov) June 6, 2023

Unregistered Securities Services

Coinbase, a behemoth in the crypto world, is accused of running its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. According to the SEC’s allegations, Coinbase has been intertwining these services without registering them as required by law. The charges indicate that Coinbase’s alleged actions have deprived investors of significant protections such as recordkeeping requirements, safeguards against conflicts of interest, and routine SEC inspections.

Staking-as-a-Service: A Thorny Issue

The SEC’s charges extend to Coinbase’s staking-as-a-service program, which allows customers to earn profits from the “proof of stake” mechanisms of certain blockchains. The SEC contends that Coinbase has been offering this service unlawfully since 2019 and has failed to register it as required by law. The SEC suggests that this failure has deprived investors of critical disclosure and other protections.

Coinbase’s Calculated Decisions: A Disguised Risk?

According to the SEC’s Chair gary gensler

 

gary gensler
chairman at US Securities and Exchange Commision
Gary Gensler is an enthusiastic leader and the current chair of the U.S. Securities and Exchange Commission (SEC). He has the extreme experience that spans wall street, government regulation, and an angel teaching about cryptocurrencies and blockchain at MIT. He announced several initiatives to enhance investor protections in the $2 trillion cryptocurrency market. He previously led the Biden-Harris transition’s federal reserve, Banking, and securities regulation agency review team. 

He was awarded Treasury’s highest honor, the Alexander Hamilton Award, and also was a recipient of the 2014 Frankel Fiduciary Prize. He was born on October 18, 1957, into a Jewish family, in Baltimore, Maryland. Graduated from the University of Pennsylvania, earning a Master’s degree in Business Administration. Additionally, he is also a professor at the MIT Sloan School of management. He has served in various governmental roles since the 1990s, such as the treasury department, Sarbanes-Oxley, CFTC, Swaps, Enforcement, Libor investigation, Maryland Financial Consumer Protection Commission, Securities, and Exchange Commission.

Gary Gensler will probably keep on filling in as seat of the SEC until 2026, accepting his renunciation. He has expressed his desires to present crypto-related approach changes later on that include token commitments, decentralized finance, stablecoins, guardianship, exchange-traded resources, and advancing stages. A few officials as well as his kindred SEC magistrates have scrutinized Gensler for not giving adequate administrative direction on crypto, possibly prompting a standoff between Congress and the association.

The SEC, CFTC, and Financial Crimes Enforcement Network handle advanced resource guidelines in the U.S., however, each with various jurisdictional cases, bringing about an interwoven methodology that crypto firms should explore to work legitimately. Whether 2022 will see a more clear way for organizations in the crypto space is questionable, yet the cosmetics of the SEC’s initiative will fundamentally change following the takeoff of chief Elad Roisman in the first month of the year. Chief Allison Lee’s term is likewise set to terminate in June 2022.

Chairman

 

 

 

and Director of the SEC’s Division of Enforcement Gurbir S. Grewal, Coinbase was fully aware of the applicability of the federal securities laws to its business activities but deliberately ignored them. Their statements imply that while Coinbase’s decisions might have boosted its profits, they have come at the expense of investors who were deprived of the protections to which they are entitled.

Also Read: A Strong Buy Signal Just Flashed; A Massive Bull Run May Soon Kick in the Crypto Space

What’s Next?

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, seeks injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief. It has triggered a wave of reactions from the crypto community, investors, and regulators worldwide.

As we watch this epic battle between the SEC and Coinbase unfold, some crucial questions arise. How will this lawsuit impact Coinbase’s operations and reputation in the global crypto market? What implications will it have on other crypto platforms and the broader cryptocurrency landscape? Will this action by the SEC pave the way for more stringent regulations in the crypto world? Only time will tell.