Regulatory challenges heavily impact the price of Coinbase stocks.
Coinbase, a United States-based cryptocurrency exchange, witnessed a sharp decline in its stock value of over 20% at the market's opening on June 6th.
Even though the stock has recuperated somewhat from its intra-day low of $46.43 to trade at $51.61, the drop in value was substantial. Currently, the firm's market capitalization is estimated at $13.5 billion.
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The drop in Coinbase stock prices occurred after the Securities and Exchange Commission (SEC) of the United States lodged a lawsuit against the company.
However, even before June 6th, Coinbase's stock prices experienced a rollercoaster. From May 26th, the stock price was increasing on a daily, reaching its highest point on June 2nd, retailing at $64.55. However, since then, the price started falling drastically.
In April 2021, Coinbase debuted its stock on the US Nasdaq exchange. Today, however, shares are down by a staggering 88% from their all-time high of approximately $435 reached on the day of the listing.
It is worth noting that SEC's accusation centered around the company's operation of an unregistered national securities exchange, broker, and clearing agency, as well as its failure to register the offer and sale of its crypto asset staking-as-a-service program. SEC Chair Gary Gensler explained:
Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.
In conjunction with the SEC's legal action, a multi-state task force consisting of state security regulators from ten states, including Alabama, South Carolina, Kentucky, California, Maryland, Illinois, New Jersey, Vermont, Washington, and Wisconsin, released a Show Cause Order against Coinbase. The order reads:
Coinbase violates the securities law by offering its staking rewards program accounts to Alabama residents without a registration to offer or sell these securities.
Following the order, Coinbase has a window of 28 days to explain why it should not be instructed to cease and desist from marketing unregistered securities in Alabama.
It appears that Coinbase's journey in the market is filled with regulatory challenges and volatility. What's next for the company remains to be seen as it navigates these hurdles.
