The U.S. Securities and Exchange Commission (SEC) has sent a Wells notice to Coinbase Global Inc, indicating a potential enforcement action against the crypto exchange. The notice comes as the SEC intensifies its efforts to regulate the largely uncontrolled crypto sector. Coinbase shares fell nearly 13% in extended trading following the announcement.
The potential enforcement actions are related to Coinbase's spot market, Earn, Prime, and Wallet products. The SEC has been increasing its scrutiny on staking services like Coinbase's Earn for not being registered. Staking involves cryptocurrency holders participating in blockchain transaction validation, often offering significant yields to customers.
Coinbase Chief Legal Officer Paul Grewal stated in a blog post, "Although we don't take this development lightly, we are very confident in the way we run our business - the same business we presented to the SEC in order for us to become a public company in 2021." He added that the company is prepared for a legal process and believes that the SEC has not been fair or reasonable in its engagement on digital assets.
Coinbase's services continue to operate as usual, and a Wells notice does not necessarily result in charges or indicate any violation of the law. This development follows a series of enforcement actions against crypto industry players, including Gemini, Genesis, TRON executive Justin Sun, Do Kwon, and Kraken.
Grewal emphasized that Coinbase seeks regulatory clarity, saying, "Tell us the rules and we will follow them. Give us an actual path to register, and we will register the parts of our business that need registering."
