Coinbase CEO Brian Armstrong at Vanity Fair’s New Establishment Summit, October 2019.Vanity Fair
Cryptocurrency exchange Coinbase received a warning from the U.S. Securities and Exchange Commission that it has identified potential violations of securities law, the company said in a blog post on 22 March.
According to the announcement, the U.S.-based exchange received a “Wells Notice” from the regulator — letter warning a company that the SEC may take enforcement action — who alleged that some of Coinbase’s services may be violating securities law. The exchange noted that the aspects of its business that may targeted by the SEC included its Coinbase Earn staking program, listed digital assets, Coinbase Wallet, and its Prime service. Coinbase’s Chief Legal Officer, Paul Grewal, said on Twitter:
Grewal further noted that exchange welcomes a legal process so that it could provide clarity around the regulation of digital assets, something Coinbase has been advocating for a while. He also explained that the exchange has met with the SEC more than 30 times in the past 9 months, sharing details of its business in order to “build a path to registration”, but the regulator gave it zero feedback on what needs to be changed.
The company said that the Wells Notice did not provide a lot of information, just that the SEC had identified potential violations of securities law. The exchange aksed the SEC to specifically identify which assets on the platform they believed were securities, but the regulator declined to do so. Coinbase explained that it will continue to operate its products and services “as usual” while undergoing this investigation. The Wells Notice came shortly after Coinbase submitted a petition to the regulator in an effort to explain why staking should not be universally labled as securities.