US crypto crackdown heats up as watchdog sues Coinbase for breaching securities laws

US financial watchdog the SEC continues to crack down on the crypto sector, accusing exchange Coinbase of breaching securities laws just a day after suing its rival Binance.

In a filing with a federal court in New York, the SEC sued the exchange for breaching securities laws. It said Coinbase - the biggest crypto exchange in the US - has taken on the role of a broker, exchange and clearing house, despite failing to register for permission for any of these roles.

“All the while, Coinbase has earned billions of dollars in revenues by, among other things, collecting transaction fees from investors whom Coinbase has deprived of the disclosures and protections that registration entails and thus exposed to significant risk,” the SEC said.

The watchdog added that the exchange has understood “since at least 2016” that cryptocurrency is a financial asset regulated by the SEC. It said Coinbase paid “lip service to its desire to comply with applicable laws” while continuing to allow trading of these coins.

The announcement of the lawsuit sent the price of Bitcoin down by 1% to £20,543.

Nasdaq-listed Coinbase’s shares fell 17.3% to $48.56 in premarket trading.

Yesterday, the SEC accused Binance - the world’s  biggest crypto exchange - and its founder Changpeng Zhao of running unregistered crypto trading platforms, selling unregistered crypto products and having “enriched themselves by billions of US dollars while placing investors’ assets at significant risk,” according to a complaint filed on Monday at a federal district court in Washington.

Binance saw $1.6 billion (£1.3 billion) in Ethereum outflows since yesterday, data from analytics business Nansen shows, while inflows stood at $872 million, amounting to the biggest single-day net outflow since fears spread of a banking crisis in March.