All is business as usual at Coinbase as the crypto market waits for the exchange’s litigation with the SEC to unfold over the coming months, possibly years. This week, the Securities and Exchange Commission continued its crackdown on the crypto industry, suing the world’s largest exchange, Binance, on Monday, only to sue the US’s largest exchange, Coinbase, the following day. The agency claimed that Coinbase operates as an unregistered exchange, broker, and clearing house and that its staking program violates securities laws. Coinbase shares fell more than 17% over the week. According to Coin Metrics, Bitcoin surged more than 3% between Tuesday and Friday, largely holding onto its gains. Ether also recovered but did not end the week as strongly. Many hope the lawsuit will provide needed clarity on how crypto businesses should operate in a compliant manner. The result could either lay the foundation for the fledgling industry to thrive or, in the worst case, drive it out of the US altogether. Meanwhile, cryptos have reacted to the news this week: altcoin prices fell while bitcoin and ether got a small boost, but more bloodshed erupted in the altcoin space after the SEC named several coins it said are could qualify as securities. Among them were high-profile projects like Solana and Cardano, whose tokens lost 12% and nearly 14%, respectively, between Tuesday and Friday, according to Coin Metrics. Polygon’s Matic token fell 12% and Axie Infinity fell 9%. The mentions would have provided some clarity on the SEC’s position on what should be considered a security, Jefferies pointed out in a note this week. They can all be bought or sold for money, trade at the same price as another unit of the same asset, have the same value as any other token, and do not grant investors any special rights not available to other investors in that asset. The market cap of crypto “securities” fell. CryptoQuant’s “SECurities” index fell about 14% after the lawsuit, while the market caps of Bitcoin and Ether were essentially flat. JMP noted that the SEC-named “securities” excluded bitcoin and ether, which accounted for 55% of Coinbase’s trading volume during the first quarter. “Coinbase also firmly believes that the assets listed on its platform fall outside the scope of existing securities laws, and we note that other agencies (including the CFTC) and numerous legislators also have differing views on the matter,” the company said in a statement this week. “Accordingly, we believe this is the core issue of the case and the central existential issue for Coinbase’s business.” Coinbase’s outflows of crypto “securities” skyrocketed around the day of the lawsuit and sometimes the day before , when the agency sued Binance, according to CryptoQuant, listing some of the same tokens. Coinbase saw an outflow of about 20 million Polygon-Matic tokens Tuesday afternoon, trading at about 73 cents by the end of the week. Popular gaming token Axie Infinity, which is trading at around $6, saw an outflow of around 32,000 coins as of Monday afternoon. Meanwhile, sports and entertainment coin Chiliz saw outflow spikes on Monday, Tuesday and Wednesday. DeFi token Voyager saw another sharp surge on Monday and Friday.
