Coinbase CEO Brian Armstrong has revealed that the US Securities and Exchange Commission (SEC) requested the company to suspend trading in all cryptocurrencies except for Bitcoin (BTC) before initiating legal action against the exchange.
In a recent interview with the Financial Times, Armstrong shared that the SEC explicitly advised Coinbase to delist all of its more than 200 tokens, with the exception of Bitcoin, stating that every other asset was a security.
“They came back to us, and they said . . . we believe every asset other than bitcoin is a security,” Armstrong said.
“And, we said, well how are you coming to that conclusion, because that’s not our interpretation of the law. And they said, we’re not going to explain it to you, you need to delist every asset other than bitcoin.”
This request signals the SEC’s intention to exert regulatory authority over a broader portion of the crypto market.
Refusing to delist the other assets, Armstrong argued that complying would effectively mean the end of the crypto industry in the US.
“We really didn’t have a choice at that point, delisting every asset other than bitcoin, which by the way is not what the law says, would have essentially meant the end of the crypto industry in the US,” he said.
“It kind of made it an easy choice . . . let’s go to court and find out what the court says.”
Last month, the SEC sued Coinbase for selling unregistered securities and a number of other alleged wrongdoings.
The agency accused the company of operating as an unregistered broker and identified 13 cryptocurrencies on its platform as securities, falling under the regulator’s jurisdiction.
Until now, oversight of the crypto industry has been uncertain, with both the SEC and the Commodity Futures Trading Commission vying for control.
The CFTC filed a lawsuit against Binance, the largest crypto exchange, in March, three months before the SEC initiated its own legal action against the company.
SEC Views Other Cryptos As Securities
Gensler had previously stated his belief that most cryptocurrencies, except for Bitcoin, are securities.
However, the SEC’s request to Coinbase confirms the agency’s adoption of this interpretation as it seeks to regulate the industry.
Notably, the SEC’s case against Coinbase did not include Ether, the second-largest cryptocurrency, which plays a significant role in numerous industry projects.
Similarly, Ether was not mentioned in the list of crypto asset securities specified in the SEC’s lawsuit against Binance.
The SEC stated that its enforcement division did not formally request companies to delist crypto assets.
It explained that during investigations, staff may share their own views on conduct that could raise concerns for the commission under securities laws.
The issue of whether all or any crypto tokens should fall under the SEC’s purview is still being debated by US authorities.
If the SEC were to gain oversight of the crypto industry, compliance standards would become much more stringent.
Crypto exchanges often provide custody services, as well as borrowing and lending options for customers, practices that would be impossible for SEC-regulated companies.
“There are a bunch of American companies who have built business models on the assumption that these crypto tokens aren’t securities,” said Charley Cooper, former CFTC chief of staff.
“If they’re told otherwise, many of them will have to stop operations immediately.”
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