As part of its crackdown on the crypto market, the US has charged the biggest crypto trading platform in the country with operating illegally.
Despite not being properly registered with the Securities and Exchange Commission, Coinbase operated as a broker, exchange, and clearing agency for investments that are subject to SEC regulations.
According to the regulator, this allowed the firm to escape oversight, including conflict of interest safeguards.
According to Coinbase, the rules are unclear. The solution lies in enacting legislation that allows for the development of fair rules for the road that are transparent and applied equally, as opposed to litigation,” said Paul Grewal, Coinbase’s chief legal officer. Meanwhile, we will continue to conduct business as usual.
Coinbase’s complaint comes just a day after the Securities and Exchange Commission sued Binance, the world’s largest trading platform, accusing the company of mishandling customer funds, artificially inflating trading volume and evading US regulations.
In response to the allegations, authorities have committed to police the crypto market more aggressively using existing regulations, arguing that many assets are similar to other investments that are subject to government regulation.
Following the dramatic collapse of another major exchange, FTX, last year, which left many customers unable to access their funds, efforts to increase scrutiny have picked up.
Financial regulators from 10 states, including California and Alabama, submitted lawsuits alleging Coinbase was operating as an unregistered securities dealer.
Coinbase, as alleged in our complaint, was fully aware that the federal securities laws applied to its business activities, but deliberately refused to comply,” said Gurbir S Grewal, director of the SEC’s enforcement division.
It is simply not possible to ignore the rules simply because you do not like or prefer a different set of rules: the consequences for the investing public are far too severe to ignore.”
What Is Us Suing Coinbase For?
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The US is suing Coinbase, a currency exchange, for alleged violations of the Bank Secrecy Act. According to a complaint filed in a California federal court by the US Department of Justice, Coinbase reportedly failed to establish an anti-money laundering program and report transactions over $10,000 as required by law.
US lawsuit against Coinbase: Implications
The USA’s decision to sue Coinbase may have serious repercussions for the currency exchange in the United States. Upon finding Coinbase liable, the company may be required to pay substantial fines and could be forced to restructure its operations or even cease operations.
As a result, other exchanges may reevaluate compliance practices in order to remain in the government’s good graces. This could have a chilling effect on the cryptocurrencies industry in the United States.
It is also possible that the lawsuit may negatively impact Coinbase’s reputation, potentially hurting its relationships with customers, partners, and other companies in the industry.
Additionally, the US may use this tool to further regulate the cryptocurrency industry and promote greater transparency among exchanges operating in the country.
Causes of the US Crypto Crackdown
- Cryptocurrency money laundering: The use of cryptocurrencies for money laundering has raised major concerns among US regulators since the use of these technologies can conceal illegal activity from the authorities.
- Cryptocurrency fraud: US authorities believe criminals have used cryptocurrencies to evade taxes by hiding income and other assets.
- Security concerns: It may be used to facilitate a wide range of threats, including terrorist financing and cyberattacks. Regulators in the United States have taken steps to restrict the use of the asset as a result.
- Increased scrutiny of cryptocurrency exchanges: US authorities have also become increasingly aware of cryptocurrency exchanges and their operations. It has been reported that several cryptocurrency exchanges have been investigated by the authorities for fraudulent activities.
- Unregulated Nature of Cryptocurrencies: Cryptocurrencies coins are largely unregulated in the US, making it difficult for authorities to oversee the industry and control token issuance.
- Consumer Protection: The US crypto crackdown may also be intended to protect the interests of consumers. It is important that they are able to assess cryptocurrency exchanges and providers in order to ensure that they are adhering to their industry standards and providing adequate services to their clients.
