Coinbase Under Investigation For Its Earn Product, Wallet Service And Exchange Activity

TLDR;

• The SEC has issued a warning to Coinbase regarding an ongoing investigation.

• The investigation surrounds some of Coinbase’s services, including earn product and wallet service.

The SEC Is Investigating Coinbase

Cryptocurrency exchange Coinbase has received a Wells Notice from the Securities and Exchange Commission, notifying the company of an ongoing investigation into several of its services.

This latest development comes as the SEC continues to clamp down on numerous cryptocurrency companies in the United States. 

The notice relates to Coinbase’s exchange activities, its staking services, Coinbase Earn and Coinbase Wallet. While revealing this in a blog post, Coinbase wrote;

"Today, the SEC gave Coinbase a 'Wells Notice' regarding aspects of the company’s exchange, our staking service Coinbase Earn, and Coinbase Wallet after a cursory investigation. Today’s Wells Notice does not provide a lot of information for us to respond to. The SEC staff told us they have identified potential violations of securities law, but little more."

Despite the SEC looking at Coinbase’s activities, the cryptocurrency exchange said it would continue to operate its products and services as usual. 

A Wells Notice is a document the SEC issues to entities that are under investigation. However, the notice doesn’t imply a conclusion or foregone action. 

In a statement, Coinbase's Chief Legal Officer Paul Grewal said;

“We are prepared for this disappointing outcome and confident in the legality of our assets and services. If needed, 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."

Coinbase added that it has met with the SEC more than 30 months over the past few months, but the regulatory agency has been unresponsive. The crypto exchange added that it had rejected more than 90% of assets that applied to be listed on its trading platform. 

SEC’s notice comes as the regulatory agency continues to clamp down on crypto companies in the United States. Last month, rival exchange Kraken settled a case with the SEC after the regulatory agency pressed charges related to its staking-as-a-service program.

Kraken shut down its staking services in the United States and paid a $30 million fine. Kraken was charged with selling unregistered securities in the United States due to the expectation of return from the staking-as-a-service program.

However, Coinbase has since come out to state that its staking service doesn’t fall under US securities law.