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Doubling Down: SEC Charges Coinbase For Operating Illegally, A Day After Charging Binance

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The Securities and Exchange Commission charged Coinbase, the largest U.S. crypto exchange, of operating illegally as an unregistered exchange.

It marks the second straight day the U.S. regulator has taken action against a large crypto exchange.

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On Monday, the SEC filed 13 charges against the world’s largest crypto exchange Binance, its co-founder Changpeng Zhao, and other entities related to the exchange.

The SEC’s suit alleges Coinbase’s prime brokerage, exchange and staking programs violate securities laws and that 13 assets listed on its platform are considered crypto asset securities, per its complaint.

“The Coinbase Platform merges three functions that are typically separated in traditional securities markets—those of brokers, exchanges, and clearing agencies,” the complaint reads. “Yet, Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets.”

The complaint also alleges that Coinbase “has for years defied the regulatory structures and evaded the disclosure requirements” of U.S. securities law.

A busy two days

For years, crypto investors and enthusiasts have wanted clarity from the SEC about regulations around the industry. The new charges against Coinbase may provide some of that.

SEC Chair Gary Gensler has issued stern warnings and offered skepticism about the digital asset market in the past regarding what are securities and the agency’s jurisdiction over the crypto market.

The new complaint against Coinbase comes just a day after the SEC filed charges alleging Zhao and Binance controlled customers’ assets on the platform and commingled or diverted billions of dollars of those assets as they desired, including to Sigma Chain, a European business Zhao owned and controlled.

The SEC also alleges the Binance.US exchange — which was said to be its own independent exchange — was actually controlled by Zhao and Binance.

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Illustration: Dom Guzman

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