The recent news of the US Securities and Exchange Commission (SEC) investigation into Coinbase has caused quite a stir in the cryptocurrency community. The probe aims to determine whether Coinbase misrepresented the number of users on its platform, particularly the previously reported “verified users” metric.
Coinbase confirmed the investigation on May 15, following a report by the New York Times. The probe has been ongoing since the Biden administration took office. The exchange disclosed that the SEC is looking into the “verified users” metric, a figure that once exceeded 100 million and was used in company filings and marketing material.
Coinbase’s Chief Legal Officer, Paul Grewal, clarified that the metric in question was a holdover from the prior administration and has not been reported for two and a half years. The metric counted users who verified an email or phone number, potentially inflating the number of unique customers. Coinbase has since shifted to reporting “monthly transacting users,” a metric that is still disclosed in its earnings reports.
The SEC investigation comes at a time when the regulatory landscape for cryptocurrencies is evolving. The leadership shift at the SEC under the Trump administration has taken a more crypto-friendly stance, but ongoing probes like this demonstrate that regulatory scrutiny over crypto firms’ disclosures remains a priority.
In addition to the SEC investigation, Coinbase has faced challenges with a recent security breach that led to stolen customer information and a $20 million ransom demand. The incident is estimated to cost up to $400 million to address, causing concern among investors.
Despite these setbacks, Coinbase has been making significant strides in recent weeks. The exchange announced an acquisition to expand its global presence and is set to enter the S&P 500 index next week. During its first-quarter earnings call, CEO Brian Armstrong expressed ambitions for Coinbase to become the number one financial services app in the world within the next five to ten years.
As the SEC investigation continues, Coinbase remains focused on its growth and expansion plans. The company’s ability to navigate regulatory challenges and maintain its position as a leading cryptocurrency exchange will be closely watched in the coming months.