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Coinbase in turmoil over SEC investigation for allowing illegal trading of digital assets

5 years ago, regulators did not pay much attention to cryptocurrencies, but today they have become one of the main targets of regulation. Whether in countries like China, or in the United States, which is currently the largest market in the world for trading cryptocurrencies, but also for mining.

According to the latest data, Coinbase will be investigated in the United States. This investigation aims to determine whether the cryptocurrency exchange platform allowed users to illegally trade digital assets.

The problem is that it looks like some of the digital assets that users traded should have been classified as securities, but Coinbase treated them like a regular digital asset. This is why the United States will begin to carry out a thorough examination, or so said three anonymous sources who are very familiar with the situation.

This is actually not the first time that the SEC, or the United States Securities and Exchange Commission, has started keeping a close eye on cryptocurrencies. Since market growth has become a problem for this entity, it has started to examine them closely.

Is the SEC against cryptocurrencies?

With the growth of the market, regulators have started to look at cryptocurrencies with some suspicion, but with the downturn it has seen in recent months, scrutiny has increased like never before. While some cryptocurrencies have soared, wiping hundreds of billions of dollars off the market, regulators view cryptocurrencies as an imminent danger to users.

As SEC Chairman Gary Gensler has stated, it is of the utmost importance that cryptocurrency exchanges receive a closer look. According to the president, these platforms should have higher security standards to better protect small investors, as they are the ones who use these platforms and suffer the most losses.

An important point to consider is that Coinbase is the largest cryptocurrency exchange operating in the United States. It gives US users the ability to trade over 150 tokens. The problem is that these tokens have long been considered digital assets, which is why the SEC’s scrutiny hasn’t been greater, but it looks like that has changed.

The next SEC review will be to determine which of the more than 150 tokens that can be traded on Coinbase qualify as securities. If there are tokens there that can be understood as securities, Coinbase might face some issues besides having to register with the SEC.

It is also important to note that in the past, Coinbase has discussed how the agency could oversee the crypto industry. In fact, over the past week, Coinbase has asked the SEC to make proposals for clearer rules, and during this time, Coinbase has made the decision to increase the tokens it has available for trading, which alerted the SEC.

What will happen to Coinbase?

As of now, it’s unclear what will happen to Coinbase, but what we do know is that tension between the exchange and the SEC has increased recently. On July 21, the SEC charged a former Coinbase employee with allegedly violating insider trading rules and leaking certain information.

He reportedly advised his brother and a friend to invest in a cryptocurrency before joining Coinbase’s new tokens, so that when the platform included them, they would make a profit.

Additionally, the SEC has apparently determined that nine of the tokens offered by Coinbase are considered securities. In response, the CEO of Coibase said that the company thoroughly reviews each of the tokens it includes. This means that they can determine whether or not it is a title.

It is likely that we will soon see discussions about which tokens are a security and which are not. In the event that the SEC determines that one of Coinbase’s tokens is classified as having value, the situation will become a little more difficult for the exchange, as it will face certain restrictions.

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