US SEC threatens to sue Coinbase over some crypto products

March 22 (Reuters) – The U.S. Securities and Exchange Commission (SEC) has threatened to sue Coinbase Global Inc ( COIN.O ) over some crypto exchange products, turning up the heat on the largely unregulated sector.

Shares of Coinbase fell nearly 13% to $67.33 in extended trading after the company said Wednesday that regulator Wells issued a notice — a formal notification that SEC staff intends to recommend enforcement action.

The potential enforcement actions will be linked to Coinbase’s spot market and features of its Earn, Prime and Wallet products, the company said.

The SEC has been intensifying efforts to crack down on the crypto industry since the FTX implosion last year, and staking services like Coinbase’s Earn have come under increased scrutiny for not being registered.

Staking is a process where cryptocurrency holders volunteer to verify transactions on the blockchain. These products often provide customers with eye-popping yields.

Last month, Kraken agreed to shut down its US cryptocurrency staking service and pay a $30 million fine to settle SEC charges that it failed to register the program.

Earlier in the day, the SEC charged Chinese cryptocurrency entrepreneur Justin Sun with fraud and accused eight celebrities, including actress Lindsay Lohan, of illegally promoting his crypto assets.

After the announcement, Coinbase said its services will continue to operate as normal.

A Wells Notice does not always result in charges or signal that the recipient has violated any law.

Niketh Nishant reports in Bangalore; Editing by Devika Syamnath

Our Standards: Thomson Reuters Trust Principles.

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