Coinbase Prohibits Crypto Startup Swarm from Tokenizing its Shares

Cryptocurrency startup Swarm has been planning to tokenize the shares of big companies like Coinbase, Ripple, Robinhood, and Didi. Now, Coinbase has issued a Cease-and-Desist order to the company that has put a kibosh to their plan.

Coinbase issues cease-and-desist order

On Wednesday, the cryptocurrency startup announced that it will be launching the tokens that will represent equity in individual tech companies. This means swarm investors can purchase security tokens that represent fractional shares in private companies. The official blog mentioned some of the biggest names from crypto like Coinbase, Robinhood, Ripple, and Didi to create a secondary market. These shares will be offered through partners who have acquired them from former employees.

Now, just after a few days of the announcement, San Francisco-based Coinbase has sent a cease-and-desist order to the company. As per this order, one has to stop the alleged illegal activity, never to restart it again. Reportedly, Coinbase has said that they will be taking appropriate actions against those who violate their purchase agreements,

“As a private company, Coinbase does not allow trading of stock on secondary markets for a variety of reasons, including the fact that there is not full and equal information available to the market. We will take appropriate action if we find people have sold Coinbase shares in violation of our agreements not to do so.”

Apart from Coinbase, reportedly Ripple doesn’t want its shares to be sold on the secondary market as well.

Also, read: Coinbase Moves to Asset Management, Opens Investment in its Index Fund

Swarm claiming to be SEC compliant

Swam reportedly obtained the shares of Coinbase from “approved secondary market transactions to acquire vested employee shares, or from venture capitalists who have directly acquired equity from these companies.” These Swarm tokens (SMV) are based on Ethereum blockchain that is connecting the traditional investment equity market with the decentralized and tokenized crypto environment. The goal here as defined by the Co-founder and CEO of Swarm, Philipp Pieper is:

“Our goal is to democratize investing and introducing tokens that represent equity is a major step forward in this mission. Now, any Swarm investor can hold equity in some of today’s most prominent tech startups.”

But with the cease-and-desist order, Coinbase has put a Kibosh to this plan. The company claims that Swarm has no agreement with them to sell their equity. Coinbase is privately held company that is funded by the accredited investors. However, Swarm claims that the tokens will be made available to only those investors that are approved under the KYC/AML measures.

With each passing day, the crypto market is only growing further by exploring new options. However, challenges are equally persistent in the market. Now, in order to have a more transparent decentralized environment, Swarm has to first get through Coinbase and Ripple.

Do you think Swarm would be able to go forward with its tokenization of shares of big crypto companies? Share your thoughts with us!