Coinbase Under Investigation By SEC For Staking Program, Among Other Items

Coinbase Global (NASDAQ: COIN) has revealed that it is under investigation by the Securities and Exchange Commission. The company has reportedly received “investigative subpoenas and requests” from the securities regulator.

The investigation, the presence of which was included at the end of 10-K filing made yesterday, is reportedly related to a range of the services that Coinbase currently offers to clients, including “certain customer programs, operations, and existing and intended future products.” More specifically, the investigation includes the firms “processes for listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products.”

Source: 10-K filing

This statement is then followed up by the company stating that it expects the outcome of the investigation to have no material adverse effect on the results or cash flow of the company.

Selkirk Copper Mines — sponsored Sponsored · Selkirk Copper Mines

The shutdown of Kraken

That statement however appears to be a bit of a stretch. Kraken recently agreed to shut down its staking-as-a-service offering for failing to register the offer and sale of the crypto assets with the regulator.

Staking is a procedure in which investors “stake” or lock up their crypto tokens with a blockchain validator so they can validate data blocks for new tokens. The blockchain validators then share the yield of new tokens with the investors.

The decision to shut down staking operations, which the Commission views as a security, was conducted as a means of resolving the investigation. As part of the settlement, Kraken also agreed to pay $30 million in disgorgement, prejudgment interest, and civil penalties.

At the same time Coinbase CEO Brian Armstrong was arguing publicly that “staking is not a security,” although he did not comment on the Kraken settlement.

“Staking is a really important innovation in crypto. It allows users to participate directly in running open crypto networks. Staking brings many positive improvements to the space, including scalability, increased security, and reduced carbon footprints,” Coinbase CEO Brian Armstrong wrote in a tweet.

The “non-material adverse effect”

Given the fact that Kraken was just recently forced to shutter its staking-as-a-service operation, its reasonable to assume that Coinbase will be subjected to the same fate at the end of the investigation. Save for the fact that fines might entail, the financials released last night by the company provide insight into what impact the firm would face upon its staking service being shut down.

Coinbase’s blockchain rewards segment, which reflects staking earnings, generated revenue of $62.0 million during the fourth quarter, equating to a little over 10.2% of net revenue for the fourth quarter. For the full fiscal year, blockchain rewards meanwhile accounted for $275.5 million, or roughly 8.7% of net revenue for the year.


Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Inside a Forgotten High-Grade Gold Mine in the Yukon | Blue Jay Gold [DD-on-the-GO Ep. 10]

WHICH MINING STOCKS CAN STILL RUN? | Mining Stock Mailbag [Nov. 9-13]

Silver’s Bull Market Isn’t Over | Peter Krauth

Recommended

First Majestic Hits 4.24 g/t Gold Over 48.8 Metres at Saval as Jerritt Canyon Restart Advances

First Majestic Lifts Q3 Revenue 38% to US$394.1 Million on Higher Silver Prices

Related News

Silvergate: Circle, Paxos, Gemini And Others Follow Coinbase’s Lead By Dropping Bank

Silvergate Capital (NYSE: SI) continues to suffer from the release of a Form 12b filing...

Thursday, March 2, 2023, 01:35:53 PM

SEC Charges Cronos Group With Accounting Fraud

Canadian cannabis company Cronos Group Inc (TSX: CRON) and its former senior executive were charged...

Monday, October 24, 2022, 05:52:17 PM

Coinbase Hits $100B Market Cap Before Slipping Below Opening Price

Coinbase surpassed its reference price of $250 per share, and skyrocketed to a $112 billion...

Thursday, April 15, 2021, 09:31:00 AM

SEC Begins Issuing New Disclosure Requirements for Chinese Companies Looking to List on US Exchanges

While Beijing has recently cracked down on Chinese companies looking to make their debut overseas,...

Tuesday, August 24, 2021, 10:57:41 AM

SEC Probes Elon Musk Over Twitter Share Purchases

The US Securities and Exchange Commission (SEC) is intensifying its efforts to secure testimony from...

Friday, October 6, 2023, 10:51:00 AM