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Looming Coinbase SEC Probe Upsets COIN Price

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A threat by the US Securities and Exchange Commission (SEC) to sue Coinbase Inc. has seen the Coinbase share price drop nearly 15% to $67.33 following extended hours of trading. The Wells Notice by SEC is a formal declaration that the US watchdog aims to recommend an enforcement action.

Market data shows the Coinbase share price closed at $77.14 during the typical trading session, having shed some 8.16% of its value. Nonetheless, COIN, the platform's native coin, dropped 15.8% of its value in the after-hours and closed the day at $64.95. The Coinbase stock has lost a cumulative 57% of its value over the last year.

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Coinbase SEC probe targets essential products

The regulator has been intensifying its efforts to try and clean up the largely unregulated crypto market following the implosion of cryptocurrency exchange FTX late last year.

According to the firm, the Coinbase SEC probe targets some of its essential products, such as the spot market, EARN, Prime and Wallet products, and staking, which has already been under scrutiny.

The SEC has previously trained its guns on staking, a process through which cryptocurrency holders use their crypto holdings to stabilize platforms. They validate the blockchain transactions and receive eye-popping yields in return.

The regulator forced cryptocurrency exchange Kraken to wind up its cryptocurrency staking program last month, forcing the platform to part with $30 million in penalties for 'failing to register the program'. The SEC has already charged Chinese crypto enthusiast Justin Sun and several celebrities with illegally promoting crypto assets.

A precursor for extra enforcement by the SEC

Per the SEC's allegations, staking, which involves the pooling of crypto resources, creates investment contracts and therefore qualifies as a security under the US Supreme Court case SEC vs. Howey. The regulator opines that cryptocurrency exchanges violate the country's securities laws by offering such programs to investors.

The looming Coinbase SEC probe targeting products the regulator considers securities means that platforms offering staking as a service will be forced to restructure their programs to comply with the securities law or halt them altogether.

Staking service providers, most of which are cryptocurrency exchanges, must now wake up to the fact that the SEC is increasingly indicating that it considers most pooled staking programs as securities. For the larger crypto sphere, the regulator's actions should be seen as a precursor for extra enforcement by the SEC into the industry.

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tom nyarunda

Tom Nyarunda

Tom is a freelance writer with over 15-years’ experience in content creation, blog writing, and SEO specializing in the blockchain and cryptocurrency niche. He is a philosophical figurehead who believes that to make our world a better place, we must invest in incorruptible products and procedures, of which Bitcoin and other cryptocurrencies are leading examples.

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