Regulators in the state of California have ordered Coinbase to stop offering its crypto staking services in the state. The Department of Financial Protection and Innovation on Tuesday ordered the top US cryptocurrency exchange to ‘desist and refrain’.
The department stated that Coinbase has been offering the services to residents of the state without permission, which violates state laws. This is coming on the same day that the US securities and exchange commission (SEC) sued the exchange for trading unregistered securities.
As at the end of March, the department estimates that at least 644,470 California residents were participating in Coinbase’s stake-and-earn program, with over $1.2 billion in investments. Coinbase isn’t the only exchange facing allegations in the US.
Binance, the biggest crypto exchange by trading volume was dragged to court a day before Coinbase by the same SEC. The commission alleges that Binance avoided regulation, and wasn’t transparent in its operations, putting investors at risk. At the moment, both exchanges are preparing to answer the SEC in court for the allegations levelled against them.
Coinbase to Defend Self in Alabama
Coinbase is facing a battle on many fronts, with the SEC and California against it, and now the state of Alabama. The financial regulator in the state, the Alabama Securities Commission (ASC) on Tuesday alleged that the crypto exchange violated securities laws by offering its staking rewards program to state residents without registration.
The ASC stated that Coinbase manages about 3.5 million staking rewards program accounts across the United States, none of which are 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 in a statement on Tuesday.
“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 program,” the regulator further explained.
The commission, in conjunction with other agencies is asking Coinbase to within 28 days give reasons why it shouldn’t be given a cease-and-desist order for selling unregistered securities in Alabama.
Other regulators involved are those from California, Illinois, Kentucky, Maryland and New Jersey. Also included are state regulatory authorities from South Carolina, Vermont, Washington and Wisconsin.
What will Coinbase Do
Coinbase had before now demanded that the SEC come up with clear regulations for the crypto industry in the US. The case is still in court, but the SEC has filed fresh charges against the crypto giant. Meanwhile, Coinbase had said it remains 100% loyal to the US, but will it continue to do that?
The exchange’s CEO Brian Armstrong had early stated that the company wouldn’t mind leaving the US if the regulatory climate doesn’t improve. It seems that the environment has only gotten more hostile since that statement, which means it may be time to make a move.
The exchange is already strengthening its presence outside the country, as if in preparation for this sort of situation. It has launched an offshore derivatives trading platform, and is now discussing expansion with the regulators in the United Arab Emirate (UAE). At this rate, the worst may not be over for Binance in the US yet.