- The SEC requested Coinbase to suspend trading of all digital assets except for Bitcoin (BTC), leading to a legal battle.
- Coinbase CEO revealed the SEC’s stance that all assets, except BTC, are securities, which could have significant implications for the crypto industry.
Coinbase, a prominent American cryptocurrency exchange, is currently in a regulatory dispute regarding its trading practices with the US Securities and Exchange Commission (SEC). In an interview with the Financial Times, Coinbase CEO Brian Armstrong revealed that the SEC asked the exchange to halt trading all digital assets listed on the platform, except for Bitcoin (BTC), before initiating legal action against the company in June.
The SEC’s lawsuit claimed Coinbase violated securities laws by enabling unregistered trading of 12 digital tokens, considered securities. To avoid the lawsuit, the regulatory body demanded that Coinbase delist over 200 tokens traded on its platform, except for BTC.
According to the Coinbase CEO,
“They came back to us, and they said . . . we believe every asset other than bitcoin is security. 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,”
SEC’s Pursuit of Regulatory Control in the Crypto Market
The Coinbase boss believes that the SEC’s request would significantly affect the crypto industry. Compliance with the proposal to delist most assets could have resulted in severe restrictions for American crypto businesses unless they registered with the commission.
“If Coinbase had agreed, that could have set a precedent that would have left the vast majority of American crypto businesses operating outside the law unless they registered with the commission,” said Armstrong.
Under the leadership of SEC Chair Gary Gensler, the regulator has been actively seeking greater regulatory control in the crypto market.
Gensler has consistently advocated treating most cryptocurrencies, except Bitcoin, as securities. The recent directive to Coinbase, urging them to remove all tokens except for BTC, illustrates the SEC’s determined efforts to expand its oversight over the rapidly evolving industry.
Australian Lawyer and digital asset enthusiast Bill Morgan noted that during the SEC’s request, Coinbase had already halted trading of XRP. This token had been recently deemed not a security by a court. Morgan suggested that the court’s rationale in the XRP case could potentially be applicable to numerous tokens on the Coinbase exchange, thereby questioning the SEC’s position on crypto assets.
Ironically, Coinbase at the time had already halted trading of XRP which is the one token a Court has now found is not itself a security using reasoning that probably would apply to most tokens on the Coinbase exchange. https://t.co/xr3crGwrZ3
— bill morgan (@Belisarius2020) July 31, 2023
Coinbase Pushes Back Against SEC’s Lawsuit
Following the SEC’s demand, the securities watchdog sued Coinbase, alleging the exchange violated US federal laws. The lawsuit came shortly after a similar action against Binance.
Coinbase filed a motion to dismiss the suit, contending that the SEC’s claims go beyond existing legal boundaries. The company’s Chief Legal Officer emphasized the necessity of clear regulatory guidelines for responsible crypto market innovation.
In response to Coinbase’s call for regulatory clarity, the SEC indicated that it is not rushing to establish a comprehensive framework for the emerging economy. It might take years to develop proper rules.
Recently, the SEC presented another claim in a New York federal court, arguing that Coinbase had previously used the same legal framework to make listing decisions, contradicting their current stance.
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