The SEC believes that many tokens are in fact securities. It is therefore investigating whether the US exchange Coinbase illegally offers securities for trading. This brings one of the crucial questions of regulation to the endgame. But Coinbase isn’t the only U.S. exchange to have trouble with regulators.
The Security and Exchange Commission (SEC) is currently investigating whether the US exchange Coinbase illegally offers securities (securities) for trading.
This investigation preceded a lawsuit against an employee for insider trading, but only became public yesterday. Based on unnamed sources, Bloomberg explains that the U.S. Securities and Exchange Commission is watching Coinbase particularly closely since the exchange is increasingly listing new tokens.
Coinbase itself is confident. Trust in the carefully designed tests that tokens go through before they are listed, including the Howey test, which is supposed to decide whether a token belongs in the category of securities.
Nevertheless, the investigation hovers over Coinbase like a sword of Damocles. The exchange lists 150 tokens, which it probably had to do in order to keep up with competitors such as Binance, Bittrex and other exchanges that are rapidly adding new tokens. If the SEC concludes that there are numerous securities among them, Coinbase would have to register as a securities exchange.
Apart from the costs of such a license, Coinbase would probably also lose its connection to the market as a stock exchange. Other exchanges can offer tokens for trading more quickly and more widely without the broad obligations of securities regulation, and DeFi exchanges such as Uniswap inherently allow trading with all compatible tokens as long as there is a market for them.
The SEC could thus also become the pacemaker of a change towards decentralized exchanges. After all, even those exchanges that evade the supervision of the SEC by being somewhat registered in regulatory havens will be affected by indirect effects, for example, a ban on offering the corresponding tokens to US citizens.
The Coinbase share price reacted accordingly. It fell by 21 percent to below 55 euros, which is close to the all-time low. From the peak of a good 300 euros, the share has given a good five-sixths. The decline in value thus corresponds approximately to that of cryptocurrencies, which is unusual, since exchanges rarely have to suffer in full with the market.
Given the nature of numerous tokens, it is not unlikely that the SEC will decide that many tokens listed on Coinbase are securities. Such a decision would have a massive impact on the other US exchanges, such as Kraken or Bittrex, as they also offer such tokens.
In any case, the supervision in the USA is currently taking a sharp look. For example, the Kraken stock exchange is also in trouble, but not with the SEC, but with the Ministry of Finance. This is currently investigating whether Kraken has violated sanctions against Iran.
The sanctions of the Ministry of Finance prohibit any form of export to the country in the Middle East. By allowing Iranian citizens to buy or sell cryptocurrencies, Kraken is violating the sanctions. According to a report by the New York Times, this attracted the attention of the Ministry of Finance.
Kraken refuses to comment specifically, but refers to the “robust” system of testing and measures to meet the requirements of regulation.
