Bloomberg News reports that the company has asked the watchdog to provide clarification about digital asset rules. Coinbase Global Inc. is undergoing a US probe wherein the watchdog is trying to ascertain whether Coinbase lets Americans trade digital assets improperly. The SEC wants to know that the digital assets Americans are allowed to trade should have been registered as securities, as familiar with the matter.
Coinbase manager sued for insider trading.
The scrutiny of the US Securities and Exchange Commission of Coinbase increased after the company expanded its trading and the number of tokens offered. This was revealed by the people that are aware of the matter. The investigation is being carried out to probe insider trading. This led to the regulator filing a lawsuit against one of the managers of Coinbase along with two other company associates.
Gary Gensler, the SEC Chair, has argued that the trading platforms must put in greater efforts and take appropriate measures to safeguard the retail investors.
Coinbase, the largest trading platform in the United States, allows traders to trade more than 150 tokens. However, if these products are considered securities, the same should have been registered as securities with the SEC.
In the past, Coinbase has time and again fought back about how the agency has overseen the crypto industry. To this effect, the company urged the regulator last week to provide clarity on the rules related to digital assets. In the meantime, taking a cautious move over the years, Coinbase has increased the offerings related to tokens.
What triggered the lawsuit on Coinbase?
Tensions started boiling up after one of the company’s insiders was found leaking information about inside trading details to his friend and brother, which led to a violation of rules. The individual leaked information about the tokens before they could be listed n the platform.
Bloomberg News reports that to determine whether an asset can be regarded as security, the SEC applies a legal test, which hails from the 1946 US Supreme Court decision. As per the framework, a token is under the purview of the SEC when it has investors putting in their money to fund a company to earn profits from the leadership of the company.
Coinbase went public last year had acknowledged that the regulator had scrutinized it earlier. In its earnings reports from the first quarter, the company said that the SEC sent subpoenas for information and documents related to operations, customer programs, products intended for the future, and other customer programs, aside from the company’s yield-generating products and stablecoin.
Bloomberg News reports that Gensler has argued earlier that several digital tokens fall under the purview of the jurisdiction and that the companies must register them with the regulator.
