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The SEC (Securities and Exchange Commission) has launched a new investigation into Coinbase. The latter aims to determine whether the US exchange platform allowed its users to trade unregistered assets. Since then, the company’s shares have fallen by nearly 10%. Coinbase responded.
Coinbase accused of listing unregistered assets
The launch of a new investigation by the SEC is motivated by the suspicion that Coinbase has placed assets on its platform that are not registered with the US authorities. The American giant, in fact, has recently increased the number of tokens that can be traded on its platform. Today, over 150 cryptocurrencies it is for exchange. Some of them are currently under review by the US regulator.
SEC President Gary Gensler said he regards many crypto assets as stocks. The so-called Howie test allows you to identify the latter. This test, established by the United States Supreme Court in 1946, determines whether an asset meets the criteria for an investment treaty. If so, the asset must be registered before it can be offered for exchange. This registration with the US tax authorities is part of Legal titles of 1933 and 1934.
Consequently, an asset is an investment contract when it requires the investment of money in an ordinary business with a reasonable expectation of profit from the efforts of others. “Efforts of others” specifically refers to token burns or actions taken by teams associated with a cryptocurrency project to maintain its value.
Note that this is a more recent SEC-defended interpretation of the Great Depression law that doesn’t seem to mention crypto assets. Today, The Howey test is patented by the SEC testify to the illegality of cryptography or ignorance of the applicable framework by the exchange platforms.
Finally, it should be added that, according to the Howey test, a decentralized autonomous organization (DAO) also encompasses the scope of the Investment Treaties Act. Therefore, he must also pre-register with the US tax authorities.
Coinbase has already been targeted by the SEC
This isn’t the first time the SEC has carefully scrutinized the trading platform. The American company has also repeatedly criticized the actions of the regulator.
Additionally, on July 21, the SEC accused a former Coinbase employee of insider trading. Following an investigation by the institution, the New York Southern District Court prosecuted three former exchange officials. Finally, last Thursday, the court decision was announced. All three defendants were found guilty “Electronic fraud conspiracy as part of the Commission’s insider trading plan.”
Coinbase cooperated in this investigation. In addition, the company fired the affected employees after suspicions of fraud were confirmed. It should be noted that of the nine affected assets, only seven were registered with the SEC. Since then, this has been alarming the authorities. At the same time, Coinbase has been heavily criticized obligation to register securities with a supervisory authority.
Coinbase responds to these allegations
Today, the SEC accuses the trading platform of offering assets equivalent to undeclared securities for trading. Coinbase Chief Legal Officer Paul Grewal responded:
With all due respect, we absolutely disagree with the SEC’s decision to file these securities fraud allegations, as well as the content of the allegations themselves. None of the assets included in its commissions are securities. The SEC allegations highlighted a serious problem: The US does not have a clear and workable regulatory framework for digital asset stocks. And instead of creating individual rules in a comprehensive and transparent way, the SEC relies on such one-off enforcement actions to try to bring all digital assets under its jurisdiction, even those that aren’t securities.
Coinbase’s CEO previously criticized the SEC, whose behavior he called a debrief. The investigation will run its course and its outcome remains highly uncertain. Indeed, the global interpretation of the 1933 law by the US Securities and Exchange Commission and US courts remains relatively opaque. case follows.