SEC sues Coinbase

Crypto exchange platform Coinbase is being sued by the Securities and Exchange Commission for allegedly operating as an unregistered securities exchange. Yahoo Finance caught up with various experts, analysts, and reporters to discuss the impact on the crypto market.

Yahoo Finance's Jennifer Schonberger broke down the SEC's allegations against Coinbase. Schonberger said, "The SEC is suing Coinbase this morning in the Southern District of New York for failing to register its trading platform with the agency alleging that it was an unregistered National Securities Exchange broker and clearing agency."

Mark Palmer, Berenberg Capital Markets Senior Equity Research Analyst – Fintech and Digital Assets, discussed the implications of the lawsuit and whether Coinbase (COIN) may be able to pivot its operations overseas. Palmer said, "That really is one of the big questions now with regard to Coinbase, is will it be able to pivot overseas? In the first quarter, the US represented about 86% of Coinbase's net revenue. That is not an easy pivot to execute."

Delta Blockchain Fund General Partner Kavita Gupta discussed the questions digital asset holders have around crypto regulation. Gupta said, "What are actually securities and not securities? And does the SEC actually create a pathway and say this is how it should work?"

Yahoo Finance legal reporter Alexis Keenan explained the SEC's suit against Coinbase in detail. Keenan said, "The agency says it's acting as a broker, an exchange, a clearing agency, and also a seller of securities. They say as a result, Coinbase is then evading disclosure laws that were specifically set up to protect consumers by Congress."

Yahoo Finance markets reporter Jared Blikre took a look at the market reaction and what it could mean for the crypto industry. Blikre said, "The bottom line here is if the SEC doesn't completely shut down Binance and Coinbase, then it's probably not going to derail crypto."

Video highlights:

00:00:03 - Yahoo Finance's Jennifer Schonberger

00:00:31 - Yahoo Finance markets reporter Jared Blikre

00:00:45 - Mark Palmer, Berenberg Capital Markets Senior Equity Research Analyst – Fintech and Digital Assets

00:01:17 - Delta Blockchain Fund General Partner Kavita Gupta

00:01:25 - Yahoo Finance legal reporter Alexis Keenan

00:01:45 - Yahoo Finance markets reporter Jared Blikre

Video transcript

[MUSIC PLAYING]

JENNIFER SCHONBERGER: The SEC suing Coinbase this morning in the Southern District of New York for failing to register its trading platform with the agency, alleging that it was an unregistered National Securities Exchange broker and clearing agency. The SEC also bringing charges against the largest US crypto trading platform for failing to register its crypto asset staking as a service program.

JAREN BLIKRE: 25,000, which is actually a little bit below here, was a floor. That a big historical area for Bitcoin. It has not yet reclaimed yesterday's high. And so this is factoring also the news we got yesterday from Binance.

MARK PALMER: Coinbase was involved in staking in general without registering a staking platform with the SEC. In the eyes of the SEC staking the action through, which proof of stake tokens are created, is in itself a means through which securities are created and exchanged. And that really is one of the big questions now with regard to Coinbase is, will it be able to pivot overseas?

In the first quarter, the US represented about 86% of Coinbase's net revenue. that is not an easy pivot to execute.

KAVITA GUPTA: I think the questions out there is, what are actually securities and not securities? And do SEC actually creates a pathway and say, this is how it should work?

ALEXIS KEENAN: The agency said it's acting as a broker, an exchange, a clearing agency, and also a seller of securities. They say as a result Coinbase is then evading disclosure laws that were specifically set up to protect consumers by Congress. This is the 14th case that the SEC has brought against crypto entities since January.

JAREN BLIKRE: Bottom line here is if the SEC doesn't completely shut down Binance and Coinbase probably not going to derail crypto. But if, in fact, the Coinbase business model cannot survive with SEC regulation, well, that's a different story altogether.