Coinbase Exchange Faces SEC Probe
Publicly traded crypto exchange Coinbase Global (COIN) is under investigation by U.S. securities regulators over its token listing processes as well as its staking programs and yield-generating products, the company disclosed in its most recent quarterly report.
“The Company has received investigative subpoenas and requests from the [U.S. Securities and Exchange Commission] for documents and information about certain customer programs, operations, and existing and intended future products, including the Company’s processes for listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products,” Coinbase said in the 10-Q form.
The disclosure underscores the heat Coinbase faces as a vocal (and closely regulated) U.S. crypto business.
It is under pressure on multiple fronts,
including its belief that certain tokens are not securities and therefore exempt from the SEC’s purview.
The SEC has taken a different stance in its ongoing case against an ex-Coinbase employee accused of insider trading.
Still, Coinbase said in the filing it believes these investigations will not “have a material adverse effect”
on Coinbase’s financial condition.
Crypto Yield and Staking Products
In its most recent quarterly filing, Coinbase has revealed that the SEC has sent the company investigative subpoenas over its yield and staking products.
Coinbase also shared that it has received requests from the SEC for documents
and information about certain customer programs, operations, and existing and intended future products,
including the company’s processes for listing assets and the classification of certain listed assets.
Yield farming refers to a cryptocurrency investment strategy that
allows users to lock up funds in order to earn rewards in the process.
Coinbase’s yield-generating products enable eligible customers to earn yield by lending their crypto to third-party decentralised finance (DeFi) protocols in order to earn fixed or variable interest.
On the other hand, staking involves holding funds in a cryptocurrency wallet to support the operations of a blockchain network and earning rewards in the process.
It requires a lockup where your crypto can’t be transferred for a certain period of time.
Coinbase recently launched Ethereum (ETH) staking for U.S. institutional clients on Coinbase Prime.
Staking and yield-generating products have gained traction worldwide whilst catching the eye of regulators.
For example, the UK’s tax agency,
Her Majesty’s Revenue and Customs (HMRC) updated its guidance on the taxation of lending and staking in proof-of-stake (PoS) networks earlier this year.
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