US SEC warns Coinbase of possible charges

The US SEC has issued a Wells notice to crypto exchange Coinbase over its crypto staking services. A Wells notice always comes before this regulator legally presses charges.

SEC issues a Wells notice to Coinbase

The US SEC has continued its crypto crackdowns, with Coinbase as its latest victim. It has issued a Wells notice saying that the exchange is offering some services in the US that can be classified as securities without its clearance. 

1/ Today Coinbase received a Wells notice from the SEC focused on staking and asset listings. A Wells notice typically precedes an enforcement action.

— Brian Armstrong 🛡️ (@brian_armstrong) March 22, 2023

This Wells notice is the second that the SEC issued this year after it sent one to Paxos in February. At the time, the SEC claimed that Binance USD pegged stablecoin, BUSD was a security, and Paxos should cease issuing it. The SEC has also charged Kraken, another crypto exchange, $30M for offering unregistered crypto staking services in the US. This news rocked the internet and caused a series of debates as Coinbase CEO had claimed that they had received rumors that the SEC was preparing to fight crypto staking.

Oh man, all I had to do was fill out a form on a website and tell people that staking rewards come from staking? Wish I'd seen this video before paying a $30m fine and agreeing to permanently shut down the service in the US. How dumb do I look. Gosh. ⛽️💡https://t.co/UPdQdnI6xN

— Jesse Powell (@jespow) February 10, 2023

Due to regulatory uncertainty, the news of a Well notice being issued to Coinbase has greatly shaken its stocks. The shares fell almost 12% in extended trading and another 8.16% during the trading hours.

Coinbase stands its ground against SEC charges

Coinbase has issued a statement regarding the notice saying that it supposes the SEC may aim to use enforcements on its Spot market, staking services, Coinbase Prime, Earn program, and the Coinbase Wallet. 

It noted, “The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”

The company’s CEO has called out the SEC, saying the SEC scrutinized their products pre-launch and gave them the go-ahead. He assured Coinbase clients that the company is ready to prove its products are law-compliant in court and will continue supporting them.

3/ While we understand that this is all part of the journey to reforming our financial system, we are right on the law, confident in the facts, and welcome the opportunity for Coinbase (and by extension the broader crypto community) to get before a court.

— Brian Armstrong 🛡️ (@brian_armstrong) March 22, 2023

It is not the first time he has said that his company is ready to use legislation and defend its operation from a hawkish SEC. In February, he condemned the SEC for charging Kraken and said Coinbase would face the regulator in court.

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