Shares of Coinbase plunged about 15% Thursday afternoon after the U.S. Securities and Exchange Commission (SEC) threatened to sue the cryptocurrency exchange over some products.
Global regulators are watching the sector closely after a series of crashes wiped out more than $1 trillion from the digital assets sector’s market capitalization last year.
“This news illustrates the regulatory headwinds and uncertainty faced by the cryptocurrency industry in the United States under the current administration,” analysts at BofA Global Research said.
Analysts at brokerage KBW said Wells’ notice from the SEC to Coinbase was expected and that the move could create an “overload” on the crypto exchange’s shares.
The company’s stock suffered in an industry stampede last year, losing about 86% of its value.
The regulator’s potential enforcement action is likely related to aspects of Coinbase’s spot market, as well as its Earn betting service and Prime and Wallet products, the company said.
“We specifically asked the SEC to identify which assets on our platforms they believe might be securities, and they have refused to do so,” Coinbase said.
Meanwhile, TD Cowen analysts said the only way to gain clarity on how the law applies to digital asset solutions is through litigation.
Last month, Coinbase posted a loss in the fourth quarter as trading volumes on the exchange came under pressure from an industry-wide slowdown. The company cut 20% of its workforce, or about 950 jobs, as part of a restructuring plan earlier this year.
Source: Terra
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