The US Securities and Exchange Commission (SEC) issued a ‘Wells notice’, which is a formal announcement that the regulator intends to take action
Shares in Coinbase dipped over 13 per cent yesterday after US regulators threatened to sue the company over potential violations of securities law.
The Securities and Exchange Commission (SEC) issued a ‘Wells notice’, which is a formal announcement that the regulator intends to take action.
Coinbase is an online platform that permits investors to buy, sell, transfer and store crypto currency, with nearly 100 million users worldwide.
The San Francisco-based firm said it was prepared for a ‘disappointing’ outcome from Securities and Exchange Commission arbitration, sending shares into a frenzy.
Coinbase said: We asked the Securities and Exchange Commission especially to point out which assets on our platforms they believe may be securities, and they refused to do so.
Analysts at Jefferies estimate that up to 35 per cent of Coinbase’s revenue is ‘potentially at risk, depending on the Securities and Exchange Commission’s course of action’.
Recent enforcement actions from the Securities and Exchange Commission include a $45.43 million fine issued to crypto lender Nexo Capital, and a $29.47 million fine handed to crypto exchange Kraken for failing to register its crypto staking service.
Regulators have been especially careful towards crypto after a series of high-profile collapses wiped out over a trillion dollars from crypto’s market capitalisation in 2022.
The collapse of FTX in November was the biggest of these failures, sparking a crypto currency rout and leaving an estimated one million creditors facing losses of billions of dollars.
In January, Coinbase said it would be sacking 20 per cent of its workforce, 950 members of staff, in a reshuffling plan.
Rival digital currency exchange Crypto.com also disclosed it would be sacking 20 per cent of its staff after the slump.
But the decline in Coinbase shares yesterday has interrupted the otherwise solid gains seen in recent weeks for crypto as the world turns away from conventional banks after the collapse of Silicon Valley Bank (SVB) and bailout of Credit Suisse.
