Coinbase in the crosshairs of the Sec. Could it become a stock market?

The SEC is investigating the exchange to understand if it allows the trading of financial instruments, an activity that would force it to register as a stock exchange and thus follow the different regulatory parameters 27 Jul 2022 Lorenzo Forlani

Another shock to the world of cryptocurrencies. This time it's the turn of Coinbase, one of the world's leading exchanges of digital tokens. The Securities and Exchange Commission (SEC), that is the American federal body for the supervision of the stock exchange, would be investigating its activities thoroughly, to definitively establish whether tokens are traded on the exchange that are actually listed as "securities", that is, financial instruments, traditional investment securities. If suspicions are confirmed, Coinbase may be forced to register as a stock market, and follow its different regulatory parameters. This was reported by Bloomberg, just before Coinbase's stock lost about 21% on the Nasdaq (and 75% year-to-date). According to the sources cited by the issuer, the SEC began investigating Coinbase's activities just after the latter added a hundred new fungible tokens to its platform, including Dogecoin, a famous "meme-coin". Tokens of this type tend to perform very well just after being listed on an exchange but their price then tends to prove to be extremely volatile, until their value evaporates over time. Dogecoin eleven months ago was worth 36 cents, now it is worth 6, in a strongly bearish period for all cryptocurrencies. Index of topics • Not the first survey on Coinbase • How to classify cryptocurrencies? Not the first survey on Coinbase The SEC's investigation isn't the only one against Coinbase, a company founded in 2012 by Brian Armstrong, a former Airbnb engineer, and Fred Ehrsam, a former Goldman Sachs trader. The American commission earlier this month also accused Ishan Wahi – product manager of Coinbase -, his brother Nikhil and their friend Sameer Ramani of insider trading activities, to the extent that Ishan Wahi he would have "repeatedly caught the other two on the timing and methods of listing new assets", which would have allowed them to earn about 1.1 million euros. In addition, Nikhil Wahi and Sameer Ramani would have bought over time at least nine cryptoassets that in reality would be securities, even if their lawyer Paul Grewal denies the latter aspect. How to classify cryptocurrencies? In any case, the question of how to classify cryptocurrencies remains controversial. From a general point of view, if they are "commodities" (like other types of currency), they should be regulated by the Commodity Futures Trading Commission: however, many cryptocurrency projects are financed by the sale of tokens themselves, whose primary value is speculative, given the great volatility. According to the head of the SEC, Gary Gensler, many of these tokens have precisely all the attributes of financial instruments, and should be regulated according to this assumption to protect investors. "I'm neutral on cryptocurrency technology, but I'm not neutral on investor protection," Gensler told CNBC. In general, a "security" is a financial asset with monetary value that can be exchanged, and which must therefore be registered with the same Sec. In the case of cryptocurrencies, however, it must be considered that not all digital assets are normally considered "securities": in 2018 the former head of the SEC, Jay Clayton, told CNBC that cryptocurrencies that replace "sovereign currencies" such as Bitcoin and Ethereum, cannot be called securities, even if those tokens and digital assets used in the initial offerings are (Ico ). A very confusing situation, so much so that only last week Coinbase itself had sent a petition to the SEC itself, to induce it to definitively clarify how to define a "security", and complaining about the lack, in the United States, of a "clear regulatory regime in which to work". Coinbase also accused the Commission of adopting the "punish first and then investigate" approach, rather than clarifying ex ante a set of understandable rules to follow.