All’s not well… that ends Wells. Coinbase said Wednesday that it had received a Wells notice warning from the SEC. The securities regulator is reported to be likely preparing to sue the biz over its staking program, wallet service, and some coin listings. Coinbase denied that it's offering unregistered securities and said it'll fight the SEC in court if necessary. The stakes are high:
Fee$: Coinbase makes most of its $$ from transaction fees, which could be at risk if it’s forced to pull popular coins. Now Coinbase is said to be looking into setting up an exchange overseas.
Money staker: Coinbase's staking service (picture: crypto holders earning coins for helping secure the blockchain) accounts for only 3% of revenue, but is an effort to diversify from transaction fees.
A big swing: An SEC win in court could embolden regulators, setting the stage for industry-wide enforcement actions.
Working overtime… to make up for lost time. After FTX’s collapse, some lawmakers accused securities regulators of being "asleep at the wheel." But now it seems the SEC has downed a double espresso. In January, the regulator charged Gemini and Genesis with offering unregistered securities. And last month the SEC settled with Kraken over claims the exchange's staking service violated securities laws. Kraken ended its staking program.
Lines in the sand can be easily redrawn… For years regulators applied a light touch as crypto cos like Coinbase (which has been operating in the US for 10+ years) launched new products in a hazy atmosphere. Things haven't necessarily gotten clearer: even SEC commissioners are split over how to regulate crypto. Now the US crypto industry's fate may rest in the hands of the courts.