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US Charges Coinbase, Widening Crackdown on Crypto Industry

The Securities and Exchange Commission (SEC) has charged Coinbase, the largest cryptocurrency trading platform in the United States, with operating illegally. This move is part of the SEC's ongoing efforts to increase oversight and regulation within the crypto industry. The regulator alleges that Coinbase acted as a broker, exchange, and clearing agency for investments subject to SEC rules without proper registration, allowing the firm to evade oversight and safeguards against conflicts of interest. Coinbase, in response, claims that the rules were not clear and calls for transparent legislation to establish fair regulations.

Expanding Regulatory Scrutiny: The SEC's complaint against Coinbase comes just a day after it filed a lawsuit against Binance, the world's largest crypto trading platform. The regulatory authority accused Binance of mishandling customer funds, artificially inflating trading volume, and attempting to circumvent US regulations. These actions signify a concerted effort by authorities to aggressively police the crypto industry by enforcing existing rules, arguing that many crypto assets function similarly to traditional investments and should therefore be subject to oversight.

Coinbase's Response and Market Impact: Coinbase, founded in 2012, boasts over 100 million customers and handles billions of dollars in trading volumes of digital assets daily. The company went public in 2021 with a market value of nearly $100 billion, but since then, its shares have plummeted, with the firm's current valuation standing at less than $12 billion. Upon news of the SEC lawsuit, Coinbase's shares sank more than 14%.

In March, Coinbase had previously warned of potential legal action from the SEC and expressed disappointment regarding the lack of a clear pathway for crypto firms to register. The company has also contemplated relocating outside the US to jurisdictions such as London due to regulatory uncertainty. Coinbase's Chief Legal Officer, Paul Grewal, argues for transparent legislation that fosters fair rules and warns about the consequences of ignoring regulations.

Industry Response and Congressional Discussions: The Blockchain Association, an industry group, highlights ongoing discussions in Congress as evidence that laws governing the crypto industry remain in flux. They assert that the SEC's enforcement-only approach, in the absence of clear rules, is detrimental to America's economic competitiveness and compliant companies like Coinbase. The association's CEO, Kristin Smith, expresses confidence that the courts will prove SEC Chairman Gary Gensler wrong over time.

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