The US Securities and Exchange Commission (SEC) has taken legal action against Coinbase, which is a well-established cryptocurrency exchange platform.
According to the SEC, Coinbase breached securities regulations by acting as an exchange and a broker and engaging in clearing activities without proper registration with the regulatory agency.
The US SEC vs. Coinbase Lawsuit
The US SEC filed a lawsuit against Coinbase, which is the largest exchange platform in the US. The SEC vs. Coinbase case arises from the SEC’s belief that Coinbase offered and sold securities without registering them. What’s more, Coinbase has been sued by ten states. One of them is California, which also claims Coinbase breached state securities laws.
Interestingly, this lawsuit came right after the SEC vs. Binance court case for similar violations of the securities laws. In response to the actions of the US SEC, Coinbase’s Chief Legal Officer, Paul Grewal, expressed disappointment. He said that the SEC action is anticipated and criticized the SEC for its rigid approach and the lack of clear regulatory guidelines for the crypto industry.
Furthermore, the CEO of Coinbase, Brian Armstrong, announced that if it’s necessary, they would ask for clarity because he sees the SEC’s approach as harmful to the United States.
As a result of the lawsuit, Coinbase lost around $1.43 billion in net flows. According to crypto data provider Nansen, this is the largest withdrawal that Binance faced in one day since December 12.
But this isn’t the only conflict Coinbase has with the SEC. Earlier in April, when Coinbase disclosed the possibility of any actions against it, it sued the SEC because the company didn’t provide clear guidance on whether there will be new rules for digital assets.
However, a bit earlier than the current Coinbase vs. the SEC lawsuit, the House Financial Services Committee Chair and the House Agriculture Committee Chair introduced draft legislation. The draft included a request for establishing rules for crypto platforms, which will come with a clear registration form for the SEC.
Unfortunately, it seems like the CEO of Coinbase pointed out conflicting statements about views on securities by the SEC. He says that in 2021, Coinbase underwent a review by the US SEC and became a public company. However, when they tried to register with the SEC in March, they didn’t get any response. According to him, this shows a lack of a solid registration procedure.
Moreover, the chief legal officer of Coinbase also expressed his frustration with the SEC. He described that they tried to reach the SEC over 30 times so that they could establish a regulatory framework, but again, there was no response.
Cryptocurrencies in the Everyday World and Their Reputational Damage
Cryptocurrency, once a niche interest of tech-savvy individuals, has now made its way into the modern economy and everyday living. This transition is evident in various high-end sectors.
Tech startups leverage blockchain for secure data sharing and luxury brands recognize Bitcoin for exclusive purchases. Moreover, big tech giants also board the crypto train, incorporating digital currencies for various functions, from cloud storage payments to rewarding users for specific tasks.
In the entertainment industry, the impact of cryptocurrency is seen in different forms. For instance, consider the popularity of online slots, which now often accept Bitcoin and other cryptocurrencies. This parallel growth signifies a wider societal shift towards embracing digital and online activities, with crypto being one of the major drivers of this trend.
The footprint of digital assets extends even further into industries like real estate, where high-value transactions are increasingly being executed seamlessly with cryptocurrencies. High-profile art auctions and collectibles markets are also shifting, now embracing non-fungible tokens (NFTs) as a form of ownership transfer.
Even in the sphere of venture capitalism, cryptocurrencies are making their mark. Initial Coin Offerings (ICOs) are being explored as innovative alternatives to traditional fundraising mechanisms. Moreover, charities have started to welcome donations in forms like Bitcoin and Ethereum, testifying to the widespread acceptance of these digital currencies.
As cryptocurrencies have such an impact on one country’s economy, such a lawsuit can drastically affect them and their influence. Mikkel Morch, chairman and director of the crypto hedge fund ARK36, says that if Coinbase is found guilty, it will suffer severe reputational damage. More precisely, it will pay fines or even face a shutdown.
Following a shutdown, the market will undeniably face serious changes. For example, its volatility will increase, and its sentiment and stability will be damaged. This is because investors will withdraw their funds and go to other platforms. More so, the country’s economy can get reduced taxes because of the decline in the crypto market.
Investors’ Enthusiasm
Because of this event, investors’ interest is decreasing. JPMorgan reported that there was a 25% decline in May in the total crypto market volume across exchanges. According to him, this situation can result in serious regulatory risks and put pressure on all token prices. He also mentioned that the absence of positive developments and the overall lawsuit going on are lowering investors’ enthusiasm.
