Coinbase is the second crypto firm to receive a Wells notice

Popular US-based crypto exchange Coinbase may soon find itself in hot water with federal regulators.

The company’s CEO, Brian Armstrong, announced on Twitter On Wednesday (March 22), the exchange received a Wells notice from the US Securities and Exchange Commission (SEC) related to Coinbase’s list of potential unregistered securities across its suite of digital asset products and services.

“Based on discussions with staff, the company believes these potential enforcement actions will be related to aspects of the company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet,” Coinbase said in a statement.

Wells notices are not formal charges or lawsuits, but can often lead to them.

Most recently, at least for the digital asset sector, Paxos, a New York-regulated blockchain infrastructure and financial services platform, was issued a.

Paxos sunsets its Binance-branded stablecoin product in response to SEC notice.

Just as the Paxos Wells alert led to the retirement of its BUSD stablecoin, SEC pressure on Coinbase has reportedly already killed the company’s stake reward product for at least one crypto token, Algorand.

“I woke up this morning to find Coinbase killed rewards…they are evaluating their services in light of recent regulatory scrutiny and for that reason will no longer support Algo rewards for retail customers,” tweeted CEO of Algorand.

Coinbase users can still earn staking rewards from the Ethereum, Cosmos, Tezos, Cardano and Solana blockchains, according to the Coinbase site.

read more: Kraken exits US Crypto Staking after $30M settlement with SEC

During the company’s latest earnings call last month (Feb. 21), Armstrong reiterated to investors his firm belief that the exchange’s operations did not violate any securities laws, repeatedly stressing that neither the stake products nor the USDC stablecoin were securities.

“Policy is my top priority for this year,” the CEO told investors.

Coinbase shares are trading down around 12% on the news.

“Two years ago, the SEC reviewed our business in detail and approved Coinbase going public. Our S1 clearly explained our asset listing process and included 57 references to efforts. Coinbase runs a rigorous asset review process and has rejected more than 90% of assets that has applied to be listed on the platform. tweeted Armstrong, links to a blog post titled, “We asked the SEC for reasonable crypto rules for Americans. We got legal threats instead.”

As reported earlier by PYMNTS, Coinbase is looking to build a new crypto market outside the US, as frustration grows on both sides between the crypto industry and the government.

“We are very confident in the way we run our business — the same business we presented to the SEC to become a public company in 2021,” the company stated.

As reported by PYMNTS, the past few months have not been kind to crypto.

The events that follow the Coinbase Wells notice will be closely watched by the crypto community, as they could lead to more regulatory clarity around exactly which, if not all, crypto services fall under and are subject to US securities laws.