After Binance, the U.S SEC Presses Charges Against Coinbase The body also alleged that the crypto asset trading platform had failed to register the offer and sale of its crypto asset staking-as-a-service program.
By Paromita Gupta •
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Just 24 hrs after charging Binance with 13 violations, the U.S. Securities and Exchange Commission (SEC), on Tuesday, filed charges against Coinbase for operating as an unregistered national securities exchange, broker, and clearing agency.
The crypto platform is alleged that it intertwined the traditional services of an exchange, broker, and clearing agency without having registered with the Comminsion for these functions as required by the law.
"We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions. In other parts of our securities markets, these functions are separate. Coinbase's alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC. Further, as we allege, Coinbase never registered its staking-as-a-service program as required by the securities laws, again depriving investors of critical disclosure and other protections," said Gary Gensler, SEC Chair.
The body also alleged that the crypto asset trading platform had failed to register the offer and sale of its crypto asset staking-as-a-service program. Through this program, customers are allowed to earn profits from the "proof of stake" mechanisms of certain blockchains and Coinbase's efforts. Through this program, Coinbase allegedly pooled each type of customers' stakeable assets, staked the pool to perform blockchain transaction validation services, and provided a portion of rewards generated through this to customers whose assets were used in the pool.
"Coinbase failed to register its offers and sales of this staking program as required by law," the official statement read.
According to SEC, since at least 2019, Coinbase has made billions of dollars unlawfully by facilitating the trading of crypto asset securities. As per the complaint, Coinbase's failure to register itself has led to significant safety and protection lapse, including inspection by the SEC, recordkeeping requirements, and safeguards against conflicts of interest.
"You simply can't ignore the rules because you don't like them or because you'd prefer different ones: the consequences for the investing public are far too great. As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them. While Coinbase's calculated decisions may have allowed it to earn billions, it's done so at the expense of investors by depriving them of the protections to which they are entitled. Today's action seeks to hold Coinbase accountable for its choices," said Gurbir S. Grewal, Director, SEC's Division of Enforcement.
