As the crypto market trades flat ahead of Friday’s highly anticipated Jackson Hole conference, Coinbase is in the headlines for multiple reasons on Tuesday.
The bad news comes first, a user has filed a class-action lawsuit against the exchange, seeking damages for those whose accounts and wallets have been breached.
The August 15 filling in the U.S. district court for the Northern District of Georgia shows that the plaintiff, George Kattula, has requested a jury trial against Coinbase, alleging that the exchange did not employ standard practices to secure accounts and that it “improperly and unreasonably locks out its consumers from accessing their accounts and funds” during periods of peak volatility in the crypto market.
Kattula also charged Coinbase with not being registered as a broker or dealer in the U.S., taking the stance that cryptocurrencies are considered securities.
“Coinbase does not disclose that the crypto assets on its platform are securities,” the lawsuit states. “Indeed, Coinbase boldly flouts federal and state laws by proclaiming it does not need a registration statement for those securities and by refusing to register as a securities exchange or as a broker-dealer.”
According to Kattula, “Crypto assets resemble traditional securities because they represent an investment in a project that is to be undertaken with the funds raised through the sale of the crypto (whether it be a ‘token,’ ‘stablecoin,’ or cryptocurrency). Investors purchase crypto with the hope that the crypto’s value will appreciate as the issuer creates some use that gives the crypto value.”
PayPal partners with Coinbase’s TRUST network
On the positive side of things, it was revealed that PayPal had joined Coinbase’s Travel Rule Universal Solution Technology (TRUST) network, whose goal is to “protect the security and privacy” of customers while complying with the banking industry’s Travel Rule.
The TRUST network was launched back in February by 18 virtual asset providers (VASPs), including Kraken and Robinhood, and has now grown to a membership count of 38 with the addition of PayPal.
The Travel Rule in the U.S. requires VASPS to report specific information relating to customer fund transfers from one financial institution to another for amounts greater than $1,000. The TRUST network focuses on disclosing the necessary data while also protecting user privacy at the same time.
The move from PayPal is being seen as validation for the crypto industry as the platform serves more than 400 million customers worldwide and could help open up more opportunities for cryptocurrency adoption on a global scale.
PayPal has slowly been increasing its engagement with the cryptocurrency sector after adding the ability to purchase cryptos on the platform in October 2020, announcing in June of 2022 that users are now allowed to transfer, send and receive digital assets between PayPal and other wallets.
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