Shares of Coinbase Global Inc. (COIN), America's largest crypto exchange, tumbled Thursday morning after the firm revealed the U.S. Securities and Exchange Commission (SEC) may take legal action over the crypto exchange's products.
Coinbase Global Inc. received a Wells notice from the SEC, signaling that the agency plans to sue on the grounds that the crypto exchange's tokens and other products, including aspects of its staking service Coinbase Earn and Coinbase Wallet, are securities that should be registered.
This notice is the latest action by regulators that challenges crypto firms, adding further pressure on a largely unregulated industry.
Coinbase will continue to operate as usual, and the company is confident in the legality of its assets and services, Chief Legal Officer Paul Grewal said in a statement.
The company hopes legal action would clarify the SEC's stance on crypto, which it claims is divided within the commission. The internal divisions have resulted in uneven enforcement, the company said.
"...We welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC simply has not been fair or reasonable when it comes to its engagement on digital assets."
In response to the notice, Coinbase CEO Brian Armstrong tweeted, “While we understand that this is all part of the journey to reforming our financial system, we are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court."
Since the implosion of FTX last year, the SEC has increased its efforts to crack down on the crypto industry, and services such as Coinbase's Earn are being scrutinized for not being unregistered.
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