The road bumps continue for Coinbase. Less than one week has passed since the crypto exchange’s former product manager was arrested and charged with insider trading. But now, the Securities and Exchange Commission (SEC) is reportedly investigating the company on whether or not it allowed users to trade unregistered securities on its platform, according to a Monday Bloomberg report.
The inquiry, which has yet to go public, came partly in response to the company’s decision to expand the number of tradeable tokens it offers its users.
Coinbase Chief Legal Officer Paul Grewal took to Twitter to address the investigation, saying the company is confident that their “rigorous diligence process — a process the SEC has already reviewed — keeps securities off our platform,” adding that the firm “look[s] forward to engaging with the SEC on the matter.”
This comes on the heels of a series of new issues between the agency and the crypto exchange, which have occurred with increasing frequency in recent weeks.
On July 21, 2022, Coinbase issued a petition to the SEC, asking them to begin rulemaking on digital asset securities, citing what they see as the fact that “securities rules simply do not work for digitally native instruments.” The request comes as little surprise given the primarily punitive relationship the regulatory agency has had with crypto and NFT exchanges.
The action exacerbates a strained relationship between Web3 companies and the regulatory bodies in the United States tasked with incorporating blockchain-based economies into their existing legal frameworks.