Coinbase responds to SEC allegations, warns of reputational risk

The American bitcoin exchange Coinbase responded to a notice from the SEC, saying it was prepared to “vigorously defend itself.”

Representatives of the trading platform noted that in 2021 the Commission allowed the company to list on Nasdaq, meaning at that time it did not regard the business as illegal.

Coinbase also warned the regulator that it would likely suffer reputational damage due to its “sudden reversal,” if it pursues the company.

“The story that will be told is the story of a company that […] consistently sought clarity and to comply with the law, voluntarily providing the Commission with data about its activities, only for that information to be used against it in a puzzling attempt to extinguish a large part of the business,” Coinbase said.

On March 23, the regulator sent a notification to the exchange about an investigation into the listing procedure on the platform and its products — Coinbase Prime, Coinbase Wallet and staking service Coinbase Earn.

Representatives of the exchange noted that the Coinbase Wallet service is not a brokerage service, and the staking feature does not constitute a securities offering.

“There were no new rules written about digital assets, and yet the SEC is pursuing an enforcement path that, in their view, was not available a couple of years ago,” the company noted.

Earlier Coinbase took the matter to court to obtain a response from the Commission to a petition filed in July 2022. In it, the exchange called for clarity in regulating the crypto industry.

In April, Coinbase CEO Brian Armstrong said the company could exit the U.S. market due to a lack of regulatory clarity. As an alternative, he named the United Kingdom.

According to Bloomberg sources, Coinbase began consulting with its institutional clients about connecting to a non-US exchange.