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Coinbase Receives Wells Notice from the SEC

Summary:
Coinbase just can’t seem to catch a break. Not long ago, the company was the subject of a lawsuit that’s now being examined by the U.S. Supreme Court, and the trading platform is also the receiver of a Wells notice sent by the Securities and Exchange Commission (SEC), proving once again that the agency has just become a complete bully to all digital currency firms. Will the SEC Go After Coinbase? To be clear, Coinbase has not been charged with anything at the time of writing, though a Wells notice usually implies that charges are coming at some point in the not-so-distant future. The SEC has made it clear how it feels about staking and securities in the past, and now, the agency is alleging that Coinbase may have broken securities laws. Analysts at Key Banc have

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Coinbase just can’t seem to catch a break. Not long ago, the company was the subject of a lawsuit that’s now being examined by the U.S. Supreme Court, and the trading platform is also the receiver of a Wells notice sent by the Securities and Exchange Commission (SEC), proving once again that the agency has just become a complete bully to all digital currency firms.

Will the SEC Go After Coinbase?

To be clear, Coinbase has not been charged with anything at the time of writing, though a Wells notice usually implies that charges are coming at some point in the not-so-distant future. The SEC has made it clear how it feels about staking and securities in the past, and now, the agency is alleging that Coinbase may have broken securities laws.

Analysts at Key Banc have mentioned:

No charges/enforcement action were presented against Coinbase connected to the Wells notice as of March 22, 2023, though such notices generally precede future charges/enforcement action per our understanding. We can’t assess the model impact with high confidence at this juncture given the apparent lack of detail from the SEC and obvious lack of explicit charges/enforcement action, though [we] do recognize the materiality of certain products/services mentioned in the company’s announcement as it relates to revenue/adjusted EBITDA contribution.

They also commented that should regulatory action in the United States against the crypto space continue (and it likely will), Coinbase won’t be the only company that suffers. They stated:

Following the Wells notice from the SEC and the recent economic report of the President criticizing the digital asset industry, we are downgrading COIN from outperform to perform. We raised concerns about blockchain development in the U.S. after the demise of three banks… Under this unhealthy regulatory climate, we are increasingly worried about the fairness of the enforcement actions, and the ability for the ecosystem to grow with seemingly limited and shrinking support from the banking system in the U.S.

Shares in Coinbase fell by more than 16 percent following news of the notice. The analysts finished with:

Recent strength in bitcoin indicates that people have called for alternative financial systems, but it could also become the victim of its success. While we downgrade Coinbase shares, we believe both upside opportunities and downside risk have increased substantially, and we may find an attractive risk/reward entry point in the future.

There Have Been Other Victims

It seems the SEC has been on a role to persecute any crypto firms that go against its narrative. One of the most recent victims of the SEC’s digital wrath was trading firm Kraken, which per a settlement, was forced to part with about $30 million in penalty fees.

In addition, the company was made to end all its staking activities and services.

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