A key issue for Coinbase and others is whether what they offer on their platforms are securities and therefore subject to Securities and Exchange Commission jurisdiction. The agency said in March it is looking to apply securities laws to cryptocurrency exchanges, which is a main reason Coinbase has been admittedly slow to add new coins.
Coinbase reportedly met with SEC officials this year to discuss registering as a licensed brokerage and electronic-trading venue, The Wall Street Journal reported, citing sources familiar with the situation. Some analysts said that move would make it easier for Coinbase to support more coins and complying with securities regulation. A source familiar with the situation confirmed to CNBC that the company is in talks with the agency about registering, but Coinbase declined to comment. It was also reported last week that Coinbase met with officials at the U.S. Office of the Comptroller of the Currency in early 2018 about bank licenses.
The rapid growth for Coinbase hasn’t come pain-free.
The company more than doubled its user base from late 2016 to the end of last year, while bitcoin rose from less than $1,000 to it’s highest point, near $20,000. Today it’s trading at around $8,300. As new users took to the platform, some complained on Twitter and Reddit about uptime, site outages and customer support, as well as technology decisions that some say has left them short on funds.
One notable hiccup happened at the end of last year, when the company surprised markets by immediately rolling out the trading of bitcoin cash, an offshoot of bitcoin. The company had earlier said in a blog post that it was targeting a launch by January 1, 2018, but ended up launching the cryptocurrency sooner than expected.
The price of that new digital currency skyrocketed after the announcement, and CEO Brian Armstrong later said in a December blog post that the company is investigating possible insider trading. No updates have been released. Sources familiar with the company’s operations say an internal investigation conducted by a third-party team continues.
That botched roll-out of bitcoin-cash trading cost investors more than $5 million, a lawsuit alleges. Lawyers in March filed a class-action suit in the Northern District of California on behalf of customers who say they were damaged by “negligence in the handling of the launch.”
Coinbase declined to comment on its internal review or any ongoing litigation.