BusinessCrypto

SEC’s probe into Coinbase listings has traders and investors rattled 

1 Mins read

Crypto’s “wild west” days of deregulation may be limited in the near future. According to Bloomberg, a probe launched by the US Securities and Exchange Commission (SEC) into digital currencies listed on Coinbase has the industry on edge. There is growing concern that significant changes in this volatile financial landscape are inevitable.

James Cox, a Duke University School of Law professor who specializes in securities law, called the activity “a shot across the entire armada rather than a single boat,” referencing the impact that the probe could have on the crypto world.

It all began on July 21 when the Department of Justice charged a former Coinbase employee with insider trading. According to Yahoo Finance, the one-time product manager shared information with his brother and a friend that led to at least 25 trades, resulting in gains of $1.5 million. This insider information was leaked before the tokens were listed on Coinbase. This is the first case of its kind related to crypto-trading activities.

On Tuesday, July 26, Bitcoin dropped 5%, and Coinbase dropped a whopping 21% after Bloomberg reported the platform could be facing an investigation by the SEC. The investigation is based on whether Coinbase permitted the improper trading of assets that should have been listed as securities. If the SEC does determine specific tokens as securities, it will generate protection requirements that crypto advocates deem incompatible with the industry.

Last week, the SEC ascertained that nine tokens listed on Coinbase fell under its jurisdiction. This statement has been parried by the Commodity Futures Trading Commission (CFTC), a body that also oversees digital assets, and it has claimed that Bitcoin and Ether are commodities under CFTC jurisdiction.

Aitan Goelman, a previous enforcement director at the CFTC, commented, “If someone claims every token except Bitcoin is a security, it creates a tremendous threat to Coinbase and the entire economy of digital currency.”

This regulatory activity is occurring in the wake of a catastrophic financial crash that uprooted the crypto industry. Valued at an all-time high of $2.9 trillion in November of 2021, the crypto market’s value plummeted to $900 billion after the May-June meltdown. Losing $1 trillion in a matter of weeks has made traders and investors very nervous, and the possibility of federal regulation is causing anxiety to rise while prices continue to be unstable.

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