Shares of Coinbase closed down more than 21% Tuesday on reports that it's facing an SEC probe into whether the platform is offering unregistered securities. Coinbase stock has lost more than 75% of its value this year. The U.S. Securities and Exchange Commission (SEC) is scrutinizing whether the company illegitimately lets users trade digital assets that haven't been registered as securities. The news was earlier reported by Bloomberg.
Coinbase had its IPO in 2021, and since then, the price of Coinbase's shares has been down more than 84%. The current price of Coinbase's share is US$52.93, down from US$67.07 the previous day. The fall in Bitcoin and Ethereum's price had already negatively impacted Coinbase, and now a prolonged investigation could totally ruin its share price.
The development comes as another blow, a day after JP Morgan informed clients that Coinbase shareholders "face risk of higher share dilution stemming from restricted stock units." Last month, Coinbase stock prices crashed further after investment bank Goldman Sachs downgraded its rating on the crypto exchange to "sell" from its previous "neutral" position.
The debate over whether cryptocurrencies are securities isn't limited to Coinbase. Cryptocurrency Ripple, often referred to by its cryptocurrency ticker symbol XRP, also has landed in legal hot water over whether its digital currency is more like a share of stock than a currency.
While the SEC hasn't made an official comment on the probe, a recent tweet and blog post by Coinbase Chief Legal Officer Paul Grewal stated: "Coinbase does not list securities on its platform. Period."
Coinbase has said it works with the U.S. Department of Justice (DOJ) and other regulators but listed these agencies as risks to shareholders in its recent quarterly filing.
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