The US Securities and Exchange Commission has issued a Wells notice to cryptocurrency firm Coinbase, recommending that the regulator take enforcement action.
Coinbase stated in a March 22 blog post that the “legal threat” might affect the exchange’s staking program, Coinbase Earn; listed digital assets; its wallet; or Coinbase Prime services. A Wells warning letter normally notifies a business that the SEC may take enforcement action, but Coinbase just offered “potential violations of securities laws.”
“We specifically requested that the SEC identify which assets on our platforms they believe may be securities, and they declined,” said Coinbase chief legal officer Paul Grewal. “Today’s Wells notice also comes after Coinbase submitted various registration proposals to the SEC over the course of months, all of which the SEC eventually failed to reply to.”
Throughout the probe, the crypto exchange said its products and services would “continue to operate as usual.” Grewal criticized SEC Chair Gary Gensler’s strategy of “come in and talk to us,” alleging that Coinbase met with SEC representatives “more than 30 times over nine months” but received little response on its recommendations.
“At no point during this review has the SEC expressed any concern about a single asset on our platform.” Moving to a Wells notice now is, to say the least, unusual.”
Coinbase filed a petition with the SEC on March 20 in an attempt to explain to the agency why staking is not always deemed a security. The exchange argued that none of its listed assets were securities under the SEC’s jurisdiction, and that any prospective targeting of its wallet was based on the SEC’s “misunderstanding of crypto products, assets, and services.”
The SEC earlier announced a settlement with Kraken under which the cryptocurrency exchange agreed to discontinue its staking program for US users. The Wells letter came on the heels of the SEC announcing a case against Justin Sun and several celebrities for the offering, sale, and promotion of Tron $0.0616 and BitTorrent (BTT).
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