Coinbase in turmoil over SEC investigation for allowing illegal trade in digital assets

5 years ago, regulators didn’t pay much attention to cryptocurrencies, but today they have become a major focus of regulation. Both in countries like China and in the United States, which is currently the largest market in the world for trading cryptocurrencies, but also for mining.

According to the latest data, Coinbase will be investigated in the United States. This investigation aims to determine whether the cryptocurrency exchange platform allowed users to illegally trade digital assets.

The problem is that it appears that some of the digital assets traded by users should have been classified as stocks, but Coinbase treated them as a normal digital asset. For this the United States will begin to make a thorough examination, or so said three anonymous sources who know the situation very well.

It’s actually not the first time the SEC, or the United States Securities and Exchange Commission, has started keeping an eye on cryptocurrencies. As market growth became a problem for this entity, it began to look closely at them.

Is the SEC against cryptocurrencies?

As the market has grown, regulators have begun to look at cryptocurrencies with some suspicion, but with the downturn they have seen in recent months, scrutiny has increased like never before. While some cryptocurrencies have soared, wiping hundreds of billions of dollars off the market, regulators see cryptocurrencies as an imminent danger to users.

As SEC Chairman Gary Gensler said, it is of the utmost importance that cryptocurrency exchanges receive a closer look. According to the president, these platforms should have higher security standards to better protect retail investors, as they are the ones who use these platforms and suffer the most losses.

An important point to consider is that Coinbase is the largest cryptocurrency exchange operating in the United States. It offers US users the ability to trade over 150 tokens. The problem is that these tokens have long been considered digital assets, which is why the SEC’s control hasn’t been greater, but it appears to have changed.

The SEC’s next review will be to determine which of the more than 150 tokens that can be traded on Coinbase qualify as stocks. If there are tokens that can be understood as securities, Coinbase may face some problems in addition to having to register with the SEC.

It is also important to note that Coinbase has in the past discussed how the agency might oversee the cryptocurrency industry. In fact, last week, Coinbase asked the SEC to make proposals for clearer rules, and during this time Coinbase made the decision to increase the tokens it has available for trading, which alerted the SEC.

What will happen to Coinbase?

At the moment, it is not clear what will happen to Coinbase, but what we do know is that the tension between the exchange and the SEC has increased recently. On July 21, the SEC accused a former Coinbase employee of allegedly violating insider trading rules and disclosing certain information.

He reportedly advised his brother and a friend to invest in a cryptocurrency before joining Coinbase’s new tokens, so that when the platform included them, they would make a profit.

Furthermore, the SEC has apparently ruled that nine of the tokens offered by Coinbase are considered stocks. In response, Coibase’s CEO said the company thoroughly examines each of the tokens it includes. This means that they can determine whether or not it is a stock.

It is likely that we will soon see discussions of which tokens are a stock and which are not. In the event that the SEC determines that one of Coinbase’s tokens is classified as valuable, the situation will become a little more difficult for the exchange, as it will face some restrictions.

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