Coinbase SEC investigation could have ‘serious and chilling’ effects: Lawyer

cointelegraph.com:

An investigation reportedly launched by the Securities and Exchange Commission (SEC) into Coinbase’s alleged trading of unregistered securities could have a “serious and chilling effect” on crypto exchanges and token projects, according to a legal expert. 

Michael Bacina, an Australian digital assets lawyer with Piper Alderman told Cointelegraph that the impact on exchanges and projects may occur whether or not the tokens are ultimately found to be securities. 

A Bloomberg report on Monday quoted sources saying the crypto exchange is facing an SEC probe into whether it improperly allowed U.S. investors to trade assets that should have been registered as securities.

The report cited three people “familiar with the matter” as saying that the probe is being conducted by the Securities and Exchange enforcement unit. It is separate from its investigation into an alleged insider trading scheme.

Bacina noted that Coinbase “could face very substantial fines” or potentially be required to register as an exchange in the U.S. as a result of the investigation.

However, he also noted that “given they have rightly identified key compliance incompatibilities between blockchain systems and existing U.S. market regulations, it may be difficult, if not impossible, for their current business model to exist as a licensed and registered exchange.”

Bacina noted that fit-for-purpose regulations require industry consultation, transparency and due regard to policy considerations.

“The best way to foster the innovation blockchain and crypto can bring is with a transparent engagement between regulators and the industry, and clear guidance being issued," he added. 

“A CFTC Commissioner has rightly called this ‘regulation by enforcement’ and it’s not an