Coinbase CEO Brian Armstrong has revealed that the United States Securities and Exchange Commission (SEC) had asked Coinbase to halt all cryptocurrency trading, except that of Bitcoin.
According to Armstrong, the SEC had requested this prior to suing the exchange for failing to register as a broker.
The Coinbase CEO made the revelation in a detailed interview, stating that the Securities and Exchange Commission had made the request before suing the exchange. Armstrong added that the regulator approached the exchange, stating that they viewed every other asset apart from Bitcoin as a security and asking Coinbase to delist assets it viewed as securities. When Coinbase asked how the SEC came to that conclusion, the regulator declined to explain its interpretation of the law. Armstrong stated,
“They came back to us, and they said… we believe every asset other than Bitcoin is a 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.”
According to the lawsuit filed by the Securities and Exchange Commission against Coinbase, it viewed 13 assets as securities. The assets in question are Solana (SOL), Polygon (MATIC), Cardano (ADA), FIL, SAND, AXS, ICP, NEAR, CHZ, DASH, VGX, and NEXO. The agency also accused Coinbase of failing to register with it as a broker, clearing agency, or national securities exchange. This, according to the SEC, meant that Coinbase was dodging the disclosure regime established by the United States Congress for the US securities markets.
Armstrong added that the exchange did not have much choice at the time. He added that if Coinbase had followed the Securities and Exchange Commission’s instructions, it would set a wrong precedent and send out the wrong message. Coinbase accepting the SEC’s instructions would have meant that most businesses and entities in the crypto space would have been deemed to be operating outside the law unless they had registered with the Securities and Exchange Commission. Armstrong added that delisting every asset apart from Bitcoin would have effectively ended the crypto industry in the United States.
“We really didn’t [did not] 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. It kind of made it an easy choice… let’s [let us] go to court and find out what the court says.”
Ripple-SEC Case Provides Some Regulatory ClarityThe crypto industry in the United States has been asking the Securities and Exchange Commission for better regulatory clarity. While the SEC has not been forthcoming, the recent SEC-Ripple case ruling brought some much-needed clarity on the subject of security and non-security. In the Ripple-SEC case, the judge ruled that XRP is not a security. The asset’s sale on exchanges, distribution to developers, sales by employees, and distribution to charities were all off the radar.
However, the judge ruled that institutional sales of the XRP token were in violation of federal securities laws. After Ripple’s partial victory, many experts and industry watchers believe the ruling would benefit the Coinbase lawsuit.
SEC And Coinbase: The Case So FarThe Securities and Exchange Commission had sued Coinbase in June, alleging that the exchange allowed investors and traders to purchase, sell, and trade crypto asset securities. The filing stated that Coinbase merged three functions typically separated in traditional markets: clearing agencies, brokers, and exchanges.
“Coinbase has never registered with the SEC as a broker, national securities exchange, or clearing agency, thus evading the disclosure regime that Congress has established for our securities markets.”
The Securities and Exchange Commission filed its lawsuit against Coinbase in the US District Court for the Southern District of New York. The lawsuit alleged that the exchange violated several registration provisions of the Securities Exchange Act of 1934 and the securities offering registration provisions included in the Securities Act of 1933. At the time, Gurbir S. Grewal, the director of the SEC’s enforcement division, had stated,
“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: the consequences for the investing public are far too great.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
