Coinbase Exchange faces SEC investigation over its crypto listings
Cryptocurrency trading platform Coinbase Exchange Global Inc is facing a U.S. Securities and Exchange Commission (SEC) probe if it improperly let Americans trade digital currencies that should have been registered as securities, according to Bloomberg news report on 26 July.
According to details, the SEC is investigating into an alleged insider trading structure that was revealed last week.
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The report further adds that Last week, U.S. prosecutors in Manhattan charged a former product manager at Coinbase Exchange and two others with wire scam in the first insider trading case involving cryptocurrency.
Ever since the Coinbase exchange platform increased the number of tokens in which it offers trading, the SEC's scrutiny of Coinbase Exchange has increased.
The SEC on 21st July had alleged that the that Coinbase Cryptocurrency Exchange listed nine Cryptocurrency Asset securities. In its complaince report, SEC said that cryptocurrency tokens AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, and KROM are unregistered securities.
Meanwhile, Coinbase Exchange had rejected the SEC’s allegations. Bitcoin.com quoted Coinbase's chief legal officer Paul Grewal as saying "Coinbase does not list securities on its platform. End of story,"
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Grewal further added that the SEC alleges that nine digital assets involved are to be treated as securities. He said that the Department of justice went through the same facts and chose not to file a securities fraud charge against those involved.
The debate over how to define Cryptocurrency coins has proven to be controversial. Generally speaking, if cryptocurrencies are commodities (like other kinds of currency), they would be regulated by the Commodity Futures Trading Commission (CFTC). But several cryptocurrency projects are funded by the sale of coins whose primary value is speculative in nature. SEC Chair Gary Gensler has earlier said that the several of these underlying coins have the attributes of securities and there is need to regulated them as such to protect investors.
Also Read: Binance Fined $3.4 Million By Dutch Central Bank
In the SEC’s recent lawsuit against the alleged insider trading structure, the SEC wrote, “A digital token or Crypto Asset is a crypto asset security if it meets the definition of a security, which the Securities Act defines to include ‘investment contract,’ i.e., if it constitutes an investment of money, in a common enterprise, with a reasonable expectation of profit derived from the efforts of others.”
Other cryptocurrency companies, such as San Francisco-based Ripple, are also fighting lawsuits from SEC. Compared to Binance Exchange and FTX Exchange, Coinbase Exchange is more selective with its cryptocurrency listings. According to data by CoinGecko, Coinbase exchange lists over 200 such cryptocurrencies.
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