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Crypto exchange Coinbase is reportedly facing an SEC investigation over securities

Crypto exchange Coinbase is reportedly facing an SEC investigation over securities

According to a Bloomberg report, cryptocurrency exchange Coinbase is reportedly facing scrutiny from the US Securities and Exchange Commission (SEC) over whether it allows users to trade unregistered securities. The SEC's investigation has not yet been made public.

Sources close to the situation told Bloomberg that the SEC began taking a closer look at Coinbase's practices after the exchange added more than 100 additional tokens to its platform, including Dogecoin, a fake cryptocurrency based on the Shiba Inu meme. These types of coins usually perform well once they are first listed, but they are very volatile, and their value usually evaporates over time.

The investigation is separate from the SEC's case against former Coinbase Product Manager Ishaan Wahi, his brother Nikhil Wahi and their friend Samir Ramani. The agency charged the three of them with insider trading earlier this month, alleging that Ishaan "repeatedly informed the timing and content of upcoming listing announcements" to his brother and friend, resulting in $1.1 million. meet. It also claims that Nikhil Wahi and Ramani "purchased at least 25 crypto assets, of which at least nine were securities."

Coinbase Chief Legal Officer Paul Grewal disputed the SEC's claims regarding Coinbase listing securities in a post on Medium, stating that the Justice Department filed a lawsuit against Coinbase by indicting Nikhil Wahi, Ishaan Wahi and Samir Ramani Is. Charges of security fraud were not filed. For insider trading. Grewal says that "none" of the assets referenced in the SEC's allegations are considered securities.

“Coinbase has a rigorous process to analyze and review each digital asset before making it available on our exchange – a process that has been reviewed by the SEC,” Grewal writes. “The process includes an analysis of whether the asset can be considered a security, and also considers the regulatory compliance and information security aspects of the asset.”

In general, a security is a tradable financial asset that holds monetary value and must be registered with the SEC. However, the tricky part about crypto is that not all digital assets are considered securities. In 2018, former SEC chairman Jay Clayton told CNBC that cryptocurrencies replacing “sovereign currencies” such as bitcoin and ether are not securities – but digital assets and tokens used in initial coin offerings (ICOs).

If this sounds confusing, that's because it is. Last week, Coinbase petitioned the SEC (PDF) to clarify what it actually considers a security, claiming that the US lacks "a clear and workable regulatory regime." Coinbase argues that the SEC takes an "enforcement-first" approach, rather than setting a set of rules for companies.

"We are confident that our rigorous due diligence process - a process already reviewed by the SEC - keeps securities off our platform, and we look forward to engaging with the SEC on this matter," Grewal wrote on Twitter.

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