Coinbase’s regulatory troubles worsened on Tuesday as California’s Department of Financial Protection and Innovation ordered Coinbase to ‘desist and refrain’ from offering its crypto staking programme to residents in the state. The state watchdog noted that the exchange has been offering the service without prior permission and in violation of state laws.
According to the regulator, at least 644,470 California residents were active investors in Coinbase’s crypto staking-as-a-service programme as of March 29 this year. These investors held over $1.2 billion in investments.
Alabama Regulator Questions Coinbase
On the other hand, Alabama state securities watchdog on Tuesday alleged that the crypto exchange violated
securities law by offering its staking rewards programme to state residents
without registration. The Alabama Securities Commission (ASC) in a statement
noted that it issued a ‘show cause’ order to Coinbase in partnership with nine
other state watchdogs.
The order gives Coinbase 28 days to defend why it should not
be slammed with a cease-and-desist order for selling unregistered securities in
Alabama. The nine
other securities regulators involved in the order are from California, Illinois, Kentucky, Maryland and New Jersey. Also included are state
regulatory authorities from South Carolina, Vermont, Washington and Wisconsin.
The latest action comes hours after the Securities and
Exchange Commission (SEC) filed a lawsuit against Coinbase, alleging that the
exchange operates an illegal trading platform and runs a crypto
staking-as-a-service programme without authorization. SEC also pushed against Binance earlier on Monday, alleging that the world’s largest cryptocurrency exchange is operating an illegal trading platforms in the United States, offering unregistered crypto asset securities and commingling customers’ funds.
According
to ASC, Coinbase manages about 3.5 million staking rewards programme
accounts across the United States. However, these accounts are neither insured
by the Federal Deposit Insurance Corporation (FDIC) nor the Securities Investor
Protection Corporation (SIPC).
“There is
no protection from loss for any of these accounts, including the more than 33, 000
accounts currently held by Alabama investors,” the state securities
watchdog said.
However, ASC clarified
that its action is not directed at preventing Coinbase from offering crypto staking to users in the state but to
ensure compliance with the state’s laws through registration.
“The
purpose of registering an offer and sale of securities, in part, is to ensure
that investors receive all material information needed to evaluate the risks of
participating in an investment, including in a staking rewards programme,” the regulator explained.
The state regulators’ actions are the latest in regulatory push back against crypto firms for offering digital
assets–considered unregistered securities by US regulators–through crypto staking offerings or programmes. Earlier in February, crypto exchange Kraken shut down its
staking service after reaching a $30 million settlement with the SEC.
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This article was written by Solomon Oladipupo at www.financemagnates.com.
