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SEC investigates Coinbase over crypto listings and securities concerns

On Wednesday, the market made a strong reversal, as the Federal Reserve maintained interest rates at 5.25%-5.50%. However, ETF investors were not convinced. Net outflows for Wednesday stood at $261 million - the third day in a row of outflows. BlackRock’s IBIT maintained its undefeated inflow streak. However, it experienced its second lowest daily inflows of $49.2 million. Even with this week’s outflows, the market showed it does not have to rely on the ETF flows to have a good time. 
On Wednesday, the market made a strong reversal, as the Federal Reserve maintained interest rates at 5.25%-5.50%. However, ETF investors were not convinced. Net outflows for Wednesday stood at $261 million - the third day in a row of outflows. BlackRock’s IBIT maintained its undefeated inflow streak. However, it experienced its second lowest daily inflows of $49.2 million. Even with this week’s outflows, the market showed it does not have to rely on the ETF flows to have a good time. 

The SEC is investigating Coinbase over whether it allowed the trading of crypto assets that should have been registered as securities, Bloomberg reported.

Coinbase maintains that it does not list securities on its platform, with the crypto exchange’s Chief Legal Officer Paul Grewal tweeting last week, “We 100% disagree with the SEC’s assertion that any of the crypto assets we list are securities.”

The SEC’s probe began before the US regulator investigated and charged a former Coinbase manager and two of his acquaintances for insider trading last week in the first such case related to crypto, according to Bloomberg. The US Department of Justice charged them with the same, alleging that the former employee tipped his brother and friend on crypto assets due to be listed on Coinbase. 

The SEC additionally filed securities fraud charges against the accused, saying that nine digital assets involved in the alleged insider trading were securities. The DOJ did not file such charges.

Coinbase spoke out against the charges. “We 100% disagree with the SEC’s decision to file these securities fraud charges and the substance of the charges themselves,” Grewal wrote in a blog post last week.

“None of these assets are securities,” he said. “Coinbase doesn’t list securities. Period.”

He elaborated that Coinbase has a process that analyses and reviews all digital assets before they are made available on the exchange, a process which the SEC has reviewed, he added. This process analyses whether an asset can be considered a security, and considers regulatory compliance and information security aspects of the asset. 

“We are confident that our rigorous diligence process—a process the SEC has already reviewed—keeps securities off our platform, and we look forward to engaging with the SEC on the matter,” Grewal said.

“We remain eager to share our perspective with the SEC, especially through a formal rule-making process desperately needed.”

The SEC declined to comment when approached by City PM

The crypto industry in the US and globally does not come under a regulatory framework, with the SEC and its chair Gary Gensler urging for clearer regulations on crypto.