Coinbase Faces SEC Investigation as Its Financial Health Deteriorates

According to Bloomberg, Coinbase Global (COIN) is facing a U.S. domestic probe into whether it intentionally or unintentionally avoided necessary due diligence letting Americans trade cryptocurrencies that should have been registered as securities. As the largest US trading platform, Coinbase lets Americans trade more than 150 tokens. If those products were deemed securities, the firm would need to register as an exchange with the SEC.

The U.S. SEC, Securities and Exchange Commission’s, investigational efforts in regards to Coinbase have increased since the platform expanded its trading operations. The probe by the SEC’s enforcement unit predates the agency’s investigation into an alleged insider trading scheme that led the regulator last week to file a lawsuit against one of former Coinbase managers and two other related persons.

SEC Chair Gary Gensler has previously also voiced his concern as he believed that Coinbase should undergo the same registration procedures as an ordinary securities exchange, given some of the cryptocurrencies it has listed. Coinbase, for its part, has criticized the SEC for not providing clear rules for defining how cryptocurrencies might be deemed securities. The exchange’s CPO, Faryar Shirzad, repeatedly said existing securities laws may not fit cryptocurrencies, and for some time his argument sounded all but accepted. The very fact that it was challenged again by regulatory authorities suggests that the crypto industry faces new challenges during its already uneasy time.

As Bloomberg rightfully puts it, the “drumbeat” in Washington for U.S. regulators to do more to oversee crypto has grown bigger as cryptos have tumbled from all-time highs, erasing hundreds of billions of dollars in market value. SEC Chairman in this respect voiced his alarm saying that major crypto currency operators should do more to protect retail investors.