The US Securities and Exchange Commission has issued a warning letter to Coinbase for possibly violating securities regulations.
The SEC’s action suggests that after the probe is done, Coinbase may face some sort of enforcement action.
Following a preliminary review, the SEC issued Coinbase a “Wells notice” regarding an unspecified amount of its listed digital assets, staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet.
Coionbase stated that it is ready 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 simply has not been fair or reasonable when it comes to its engagement on digital assets”, Coinbase chief legal officer Paul Grewal said in a statement.
As stated by the company, Coinbase products and services are still operational.
The SEC reached a settlement with Kraken last month over its crypto staking activity, in which the company paid a $30 million fine and shut down its American operations.
The commission also issued a Notice to the cryptocurrency firm Paxos about the creation of the Binance USD token.
The Wells notice, according to Grewal, does not provide much information for them to respond to.
“The SEC staff told us they have identified potential violations of securities law, but little more. We asked the SEC specifically to identify which assets on our platforms they believe may be securities, and they declined to do so,” he said.
The notification came after Coinbase submitted various registration proposals to the SEC over the course of several months, “all of which the SEC ultimately refused to respond to.”
The investigation is still in its early stages, but Coinbase stated that it submitted papers and two witnesses for testimony.
“At no point in this investigation has the SEC told us a single specific concern about a single asset on our platform. To move to a Wells notice now, is unusual to say the least,” said Grewal, adding the company remains confident in the legality of its assets and services.