SEC regulations on cryptocurrency are now even more constricting as they are set to crack down on 6 Ethereum altcoins. The U.S. Securities and Exchange Commission, in their bid to regulate what goes on in the crypto market, now targets six Ethereum-based cryptocurrencies that are based on Coinbase. The regulatory arm has been having issues with Coinbase over many things. But it is mainly related to the trading of what the SEC terms "securities." With these six altcoins in target, the SEC has sent the Wells Notice to Coinbase at the beginning of what is going to be a heated court case.
The Coinbase fallout with the SEC isn't a new story. It started as early as last year in July during the court case they had with the former employee of Coinbase. During the court case, the SEC named nine illegal cryptocurrencies on the exchange. Out of the nine cryptocurrencies, 6 of them are still existing at Coinbase. The names of the banned cryptocurrencies are Amp (AMP), LCX (LCX), Power Ledger (POWR), Rally (RLY), XYO Network (XYO), and DerivaDO (DDX).
When the SEC issued the name of these cryptocurrencies last year, Coinbase reacted, saying that the SEC had no evidence or rule to prove what should be listed on their platform. Similar to what they are saying today, Coinbase told the SEC last year that they need to create a well-defined rule for crypto companies to follow. Crypto firms are uncomfortable with SEC bursting them up and demanding settlements when they don't have any evidence of any breach. In their argument, Coinbase said that the assets the SEC termed securities were not proven to be so.
But recently, the SEC served Coinbase a Wells Notice, which might potentially take the two parties to court. While Coinbase demands clear answers to their questions, SEC is not budging from their position.
Coinbase Served a Wells Notice
Coinbase was served a Wells notice, and the crypto firm has already reacted to it, lamenting the unreasonable rules existing due to SEC regulations on cryptocurrency. In their reaction, Coinbase made a press release to the general public explaining what had happened and what they thought of it.
In the press release, the crypto firm said, "Today, the SEC gave Coinbase a “Wells notice” regarding an undefined portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet after a cursory investigation. We are prepared for this disappointing development. We are confident in the legality of our assets and services, and if needed, we welcome a legal process to provide the clarity we have been advocating for and to demonstrate that the SEC has not been fair or reasonable when it comes to its engagement on digital assets. Rest assured, Coinbase products and services continue to operate as usual - today’s news does not require any changes to our current products or services."
In their press release, Coinbase also stated that staking might be banned in the company. If the SEC bans staking in Coinbase, many traders could lose money. Coinbase also expressed their disappointment with the lack of well-defined rules from the SEC." Regulatory uncertainty in the crypto industry is getting worse. Instead of developing a regulatory framework for crypto, the SEC continues to regulate by enforcement only. We recently explained in an amicus brief the lack of guidance for crypto companies to follow," Coinbase said.