The company’s CEO says the SEC told Coinbase to stop dealing in all currencies except Bitcoin.
Brian Armstrong said the request would have meant “the end of the crypto industry in the US.” Before suing Coinbase, the US Securities and Exchange Commission asked the exchange to stop dealing in all cryptocurrencies other than bitcoin; this was a sign that the agency wanted to regulate a more significant part of the market.
In its case, the SEC said that 13 cryptocurrencies on Coinbase’s platform, most of which were not heavily traded, were securities. The SEC noted that because Coinbase sold these cryptocurrencies to customers, the exchange came under the regulator’s authority.
However, the SEC has requested that Coinbase remove all of the more than 200 tokens it offers—aside from Bitcoin, which is the most well-known—and this demonstrates that the SEC wants more control over the cryptocurrency industry.
Armstrong said, “They came back to us and said, ‘We think every asset except bitcoin is a security.'” ” And we asked, “Well, how did you come to that conclusion? That’s not how we see the law.” They said, “We’re not going to explain it to you, but you need to remove all assets except Bitcoin from the list.”
If Coinbase had agreed, it could have set a bad example that would have made it illegal for most crypto companies in the US to operate unless they registered with the commission.
“At that point, we didn’t have much choice,” he said. “Delisting all assets except bitcoin, which is not what the law says, would have pretty much ended the crypto industry in the US.” ” It made the decision pretty easy. Let’s go to court and see what the judge says.” Until now, the SEC and the Commodity Futures Trading Commission have been fighting over who should keep an eye on the crypto business.
The CFTC filed a lawsuit against Binance, the most prominent cryptocurrency platform, in March of this year, three months before the SEC did the same.
Gensler has said that, except for bitcoin, he thinks most cryptocurrencies are stocks. But the fact that Coinbase was told to do this shows that this is how the SEC sees the business and tries to regulate it.
Ether, the second-largest cryptocurrency and a crucial part of many projects in the industry, was left out of the case against the exchange by the regulator. Additionally, it wasn’t on the SEC’s list of 12 “crypto asset securities,” for which the SEC sued Binance.
The SEC said that its enforcement section had not asked “companies to delist crypto assets” in a formal way.
“During an investigation, the staff may share its ideas about what actions may raise questions for the commission under the securities laws,” it said.
The SEC is in charge of stocks, bonds, and other standard financial instruments, but US officials are still arguing about whether or not it should also be in charge of crypto tokens.
Compliance rules would be much more challenging if the SEC were in charge. Most crypto exchanges also offer custody services and allow customers to borrow and give, which is impossible for companies regulated by the SEC.
Former CFTC chief of staff Charley Cooper said, “There are a lot of American companies whose business plans are based on the idea that these crypto tokens are not securities. Many of them will have to stop immediately if told otherwise.”
Peter Fox, a partner at the law firm Scoolidge, Peters, Russotti & Fox, said, “It’s hard to see how tokens could be sold to the public or traded in stores without help from Congress.”
The SEC should have said something about what it would mean for the rest of the industry if Coinbase settled by taking every token except bitcoin off the market.