important point

  • Coinbase Issued Wells Notice This Week, Now Awaiting Formal Charge From SEC
  • Regulators continue to make moves on US crypto firms, hurting Coinbase’s prospects
  • The exchange laid off an employee for the second time in January, halted operations in Japan due to “market conditions,” and saw its stock price plummet throughout 2022.

coin base I just can’t take a break.

i wrote deep dive About the struggling cryptocurrency exchange last October when founder and CEO Brian Armstrong sold a 2% stake. Since then, however, things have gone from bad to worse.

The company laid off 20% of its workforce in January (we analyzed what this means for the company. here), six months after already reducing by 18%.again Ended We started our operations in Japan in January, citing “market conditions”.

Nonetheless, stocks were rebounding in 2023 as weaker projections of the future path of interest rates benefited the tech sector as a whole. And the SEC stepped in to end the party this week.

SEC Alleges Coinbase Violates Securities Laws

The SEC issued a Wells notice to Coinbase, warning it may be violating U.S. securities laws. Since then, the stock has fallen 24% in two days.

“Based on discussions with staff, we believe these potential enforcement actions relate to the Coinbase Earn, Coinbase Prime, and Coinbase Wallet aspects of our spot market and staking services,” Coinbase said. stated in regulatory filings. “Potential civil lawsuits may seek injunctive relief, revocation, and civil penalties.”

As Armstrong pointed out in the tweet above, Wells’ notices usually precede legal action, so the market is now waiting for a precise accusation.

Coinbase Chief Legal Officer Paul Grewal also attended, saying Coinbase remains confident in the face of the charges.

“We are not taking this development lightly, but we are very confident in how we will operate the same business that we have presented to the SEC to become a public company in 2021,” he posted.

The regulatory environment for cryptocurrencies continues to deteriorate

Despite Coinbase’s defiance, the reality is that, at least publicly, this is just the latest move by U.S. regulators to crack down on cryptocurrencies.

The last few months have seen the dramatic shutdown of the Binance-branded stablecoin BUSD, top 10 cryptocurrencies, fines related to disclosure of staking issues to major exchange Kraken, and now Wells’ notice to Coinbase. I was.

Then there’s banking chaos. While crypto isn’t to blame, the closures of SVB, Silvergate and Signature mean that major crypto banks are gone. This has hindered entry into fiat currency, which is important to the industry, and is an undeniable headwind going forward.

Regardless of whether you view any of the above as unfair, Coinbase’s conclusion is that the United States, the country where it is headquartered, has become a much more hostile environment for the crypto industry than it was a few months ago. That’s it. This is clearly bad news for investors, and for the business as a whole.

what happens next?

It is difficult to know what will happen in the future. But regulators appear to be trying to keep the cryptocurrency in check after a string of scandals that rocked the market last year (and cost customers billions in losses), including LUNA, Celsius, and most recently FTX. looks like

Prior to this latest move, Coinbase’s share price enjoyed some positives over the rally in Bitcoin, which currently trades at $28,000. This is almost double since his FTX collapse in November.

This follows a broader tech resurgence as markets bet the Federal Reserve (Fed) is largely done with last year’s rate hikes and extremely tight monetary policy.

Ultimately, Coinbase’s fate, as always, will be tied to these macro terms and the price of Bitcoin. But it would also depend on whether regulators have withdrawn their punitive stance over the past few months, which seems unlikely at this point.

By Jules

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