In a surprising revelation, Brian Armstrong, the CEO of Coinbase, America’s leading cryptocurrency exchange, reported that the U.S. Securities and Exchange Commission (SEC) had asked the company to cease trading in all cryptocurrencies, with the sole exception of Bitcoin (BTC). This statement comes in the wake of the SEC's lawsuit against the crypto giant last month.
Citing an interview Armstrong had with the Financial Times, the CEO shared, “They came back to us, and they said… we believe every asset other than bitcoin is a security.” Armstrong expressed confusion regarding the SEC's stance, noting that the regulator's perspective doesn't align with Coinbase's interpretation of the law. “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.”
However, a Coinbase spokesperson highlighted to Decrypt that the FT interview "omitted critical context regarding [Coinbase's] conversations with the SEC in the US." The spokesperson stressed that according to the SEC, the views conveyed in the FT article might have only reflected the stance of certain staff members, and not the Commission's broader consensus.
When Decrypt reached out to the SEC for clarity, there was no immediate response.
This lawsuit in June charged Coinbase with operating without proper registration. The SEC further posited that the exchange's staking service featured a minimum of 13 crypto assets that should have been listed as securities. Some notable mentions include Solana (SOL), Cardano (ADA), Polygon (MATIC), and The Sandbox (SAND).
In parallel, the SEC launched a lawsuit against another major crypto player, Binance, in June. The regulator accused Binance of allowing U.S. investors access to its global site, Binance.com, and offering unregistered securities. Allegations also surfaced against Changpeng Zhao, Binance's CEO, and the exchange concerning the misuse and intermingling of customer funds.
For Armstrong, the SEC's request was monumental. If Coinbase had yielded, it might have set a ground-breaking precedent, potentially leading to stringent regulatory actions against a vast majority of U.S. crypto enterprises operating under analogous frameworks. Armstrong stated, “We really didn’t have a choice at that point... delisting every asset other than Bitcoin... would have essentially meant the end of the crypto industry in the US.” He further added, “It kind of made it an easy choice… let’s go to court and find out what the court says.”
While the SEC’s enforcement wing clarified that they did not direct “companies to delist crypto assets,” the Coinbase spokesperson confirmed that dialogues between the crypto exchange and the SEC are ongoing. The representative expressed hope for "transparent and fair rulemaking and Congressional action" as the optimal way forward for the U.S. crypto sector.