Coinbase takes heat from SEC over listing tokens that could be securities


  • SEC chairman Gary Gensler reiterated that there is a need to regulate digital asset exchanges more closely.
  • Highlighting last week’s volatility, Senator Elizabeth Warren stated that there could be risks posed to investors.
  • Coinbase continues to be under fire as the exchange was accused of listing dozens of tokens that could be securities.

The Securities & Exchange Commission (SEC) chairman, Gary Gensler, appeared before the Senate Banking Committee to provide testimony on the regulator’s work. One of the major topics discussed was the cryptocurrency market. 

Coinbase under fire as SEC battle continues

Gensler’s prepared remarks highlighted the need to regulate cryptocurrency exchanges more closely. Appearing before the Senate Banking Committee, he further suggested that cryptocurrency projects and exchanges should have a discussion with the agency. 

The SEC chair believes that dozens to hundreds of tokens on crypto exchanges could be securities, unlike Bitcoin, the leading digital asset regulators believe is a commodity.

Senator Elizabeth Warren (D-Ma) added that last week’s flash crash seen in the crypto markets and volatility demonstrates the need to regulate digital asset exchanges. She explained that while cryptocurrencies have claimed to be a solution to financial inclusion, she criticized those claims. 

Further referring to last week’s price plunge, she highlighted that $400 billion in market value just disappeared. In a scenario where an investor wishes to withdraw money amid the volatility, major crypto exchanges, including Coinbase, face temporary connectivity issues.

Singling out Coinbase, Gensler responded to Warren, adding that the exchange did not have to register as a securities exchange even though dozens of coins listed could be securities.

The statement from the SEC boss that Coinbase could be selling securities without a registered license with the agency comes just after a week that the exchange was sued by the agency for its lending product.

The securities regulator stated that Coinbase’s planned Lend program, which allows users to earn interest on crypto assets on the platform, could be involving securities but failed to give an explanation.

While Bitcoin and Ethereum have been pointed out not to fall under securities regulation, it appears that the agency considers that many other tokens fall into a grey area. The SEC has yet to clarify which coins could be deemed as securities and provide a transparent process for identifying a token’s legal status. 

Senator Pat Toomey (R-Pa) responded in frustration during the hearing, responding to Gensler’s statement stating that he is concerned about how the SEC has not provided a sufficient definition on how it would apply the Howey Test, a test used to identify whether an investment is a security. 

Toomey further pointed out that stablecoins would not fit the definition of a security since stablecoins do not provide a “likely expectation of a profit,” as stated in the Howest test.

While Coinbase has not made a comment on Gensler’s remarks, the exchange has previously delisted XRP in light of the SEC’s legal battle against Ripple Labs. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed

Latest Crypto News


Latest Crypto News & Analysis

Editors’ Picks

Ethereum shifts away from ETH 2.0

Ethereum will be moving away from ETH 1.0 and ETH 2.0 as the protocol undergoes significant changes. Core developers on the network are referring to the stages on the blockchain as the “execution layer” and “consensus layer.”

More Ethereum News

Dogecoin price primed for an explosive move to $0.25

A brief technical and on-chain analysis on Dogecoin price. FXStreet's analysts evaluate where DOGE could be heading next.

More Dogecoin News

Solana price must regain $100 to recover from market volatility

Solana (SOL) price broke below the monthly S2 support at $89 and targeted $59 to the downside. The entrance of bulls could push price action in SOL back above S2 and keep it there going into today's session. 

More Solana News

Renowned analyst believes Bitcoin bottomed out and entered a 96-day bull cycle

Analysts have evaluated the Bitcoin price trend and revealed that a rejection of the asset’s reversal attempts could imply that it has bottomed out. Bitcoin may have hit bottom and entered a 96-day bull cycle. 

More Bitcoin News

Bitcoin: BTC may capitulate to $30,000

Bitcoin price has dropped considerably over the last three weeks. The recent downswing has made things worse for BTC and hints that a steep correction could be on its way.

Read full analysis

BTC

ETH

XRP