Crypto exchange Coinbase drops 13% after US regulators threaten to sue over potential securities violations
Shares in Coinbase fell more than 13 percent yesterday after US regulators threatened to sue the company over potential securities law violations.
The Securities and Exchange Commission (SEC) has issued a so-called Wells Notice, a formal statement that the regulator intends to take action.
Coinbase is an online platform that allows investors to buy, sell, transfer and store cryptocurrency, with approximately 100 million users around the world.
Legal threat: The US Securities and Exchange Commission issued cryptocurrency exchange Coinbase with a notice from Wells – a formal statement that the regulator intends to take action
The San Francisco-based company said it was prepared for a “disappointing” outcome from the SEC intervention, sending stocks into a frenzy.
Coinbase said: “We specifically asked the SEC to identify what assets on our platforms they believe may be securities, and they declined to do so.”
Analysts at Jefferies estimate that up to 35 percent of Coinbase’s revenues are “potentially at risk depending on the SEC’s course of action.”
Recent SEC enforcement actions include a £37 million fine imposed on cryptocurrency lender Nexo Capital and a £24 million fine handed down to crypto exchange Kraken for failing to register its crypto staking service.
Regulators have been particularly wary of crypto after a series of high-profile collapses wiped out more than a trillion dollars from crypto’s market cap last year.
The collapse of FTX in November was the biggest of these failures, sparking a cryptocurrency rout and causing billions of dollars to be lost to an estimated million creditors.
In January, Coinbase said it would cut 20 percent of its workforce, 950 staff, in a restructuring plan.
Rival digital currency exchange Crypto.com also revealed it would cut 20 percent of its staff after the recession.
But the tumble of Coinbase shares yesterday has interrupted crypto’s otherwise strong gains in recent weeks as the world turns away from traditional banks following the collapse of Silicon Valley Bank (SVB) and the bailout of Credit Suisse.