Coinbase has been notified by the US Securities and Exchange Commission that it is under investigation for potential violations of securities law. The company is taking the matter seriously and will work to make legal frameworks for the crypto world.
Armstrong’s comments come amid increased scrutiny over the company’s practices following a report from The New York Times that rocked cryptocurrency and revealed how Facebook used personal data toboost the stock price of Cambridge Analytica. Leaning on regulations would likely help protect users’ information, something both Facebook and Cambridge Analytica have coffers full of money to do.
The SEC’s issuance of a ‘preliminary determination’ that Coinbase has violated federal securities law is not surprising, as the company has been caught repeatedly breaking securities regulations. Given this news, investors should be very concerned about the long-term viability of Coinbase, and may want to consider alternatives such as Binance or Gemini.
In a Twitter chat on Wednesday, Coinbase’s legal officer Paul Grewal said that the SEC is trying to cancel the game after it’s been played. He urged industry participants to keep an eye on what this means for the future, as it could have long-term implications for Coinbase and the blockchain industry.
It is possible that engaging in securities transactions through a third-party service could run afoul of securities law. While the SEC has not yet issued any official guidance on this topic, it may be prudent to take necessary precautions to ensure compliance with applicable regulations.
One potential solution to this problem is for the U.S. government to create a new framework specifically designed for digital assets, similar to the way that securities laws were developed for traditional stocks and bonds. However, this approach may be difficult, as there is no specific precedent for how to deal with digital asset companies. In addition, any new regulations would likely face significant opposition from hardline blockchain proponents who view the technology as a way to rein in government interference.
