This article was last updated on June 7, 2023
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US Crypto Exchange Coinbase Faces Lawsuit for Facilitating Illegal Trading
After Binance, the US’ biggest cryptocurrency exchange Coinbase is facing legal action from the Securities and Exchange Commission (SEC) for allegedly trading financial products without obtaining authorisation from the market regulator.
Violation of Legal Norms
According to the SEC, Coinbase has been facilitating the buying and selling of financial products based on cryptocurrencies since 2019 without the requisite authorisation. The exchange has thus far evaded oversight and has failed to safeguard customers against fraud and manipulation. The SEC stated, “You can’t just ignore the rules because you don’t like them. Coinbase was certainly aware that the stock exchange laws applied to the company, but deliberately refused to follow them.”
Implications of Court Case
The lawsuit is expected to have far-reaching implications for the crypto industry in general and Coinbase in particular. As the latter is the biggest US cryptocurrency exchange, it is important that it maintains compliance with all legal norms to uphold its reputation and status in the crypto community.
Coinbase yet to Respond
Coinbase has not yet issued a formal response to the lawsuit. The company’s share prices have fallen about 15% as of today and this is expected to have a cascading effect on the wider cryptocurrency market, with many traders selling off their investments in the exchange.
Cryptocurrency Trading and Risk of Fraud and Manipulation
The Dutch Authority for the Financial Markets had earlier cautioned consumers about the perils of trading in cryptocurrencies such as Bitcoin and Ethereum. Investing in cryptocurrencies lacks transparency and regulation, leaving investors vulnerable to fraud, manipulation, and market volatility.
The SEC lawsuit against Coinbase is the latest in a series of actions taken by regulatory bodies against cryptocurrency exchanges for non-compliance. It is important that cryptocurrency exchanges recognise the importance of regulatory compliance and take necessary steps to ensure that their trading activities are in compliance with governmental and regulatory requirements.