The U.S. Securities and Exchange Commission (SEC) reportedly requested Coinbase to stop trading in all cryptocurrencies except Bitcoin (BTC) before suing America’s largest crypto exchange last month, according to a report by the Financial Times citing CEO Brian Armstrong.
“They came back to us, and they said [. . .] we believe every asset other than bitcoin is a security,” said Coinbase CEO. “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.”
A Coinbase spokesperson told Decrypt that the interview “omitted critical context regarding [Coinbase’s] conversations with the SEC in the US,” adding that “per the SEC’s own admission, the views shared in the FT article may have represented the views of some staff at the time, but did not represent those of the Commission more broadly.”
The SEC didn’t immediately respond to Decrypt’s requests for comment.
In a June lawsuit, the SEC accused Coinbase of operating illegally because it failed to register as an exchange. The regulator also alleged the exchange’s staking service offered at least 13 crypto assets that should have been registered as securities, including tokens such as Solana (SOL), Cardano (ADA), Polygon (MATIC), and The Sandbox (SAND).
In a separate move, the SEC also sued Binance in June for offering unregistered securities and allowing U.S. investors to access its global website Binance.com. The Wall Street regulator also alleged that Binance CEO Changpeng Zhao and the crypto exchange misused and commingled customers’ funds.
According to Armstrong, had Coinbase agreed to the request, it would have set a precedent and may have led to the regulator cracking down on the majority of American crypto businesses operating under similar conditions.
“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,” said Armstrong. “It kind of made it an easy choice [. . .] let’s go to court and find out what the court says.”
The regulator reportedly said its enforcement division did not make formal requests for “companies to delist crypto assets.”
The Coinbase representative added that the crypto exchange is still in discussions with the SEC and believes “that transparent and fair rulemaking and Congressional action, such as bills that we saw gain bipartisan support in the U.S. House of Representatives last week, represent the best path forward for American crypto users and the companies building the cryptoeconomy in the U.S.”
Gensler on Bitcoin
SEC Chair Gary Gensler has previously suggested that all cryptocurrencies aside from Bitcoin are securities.
He’s also often been citing the lack of investor protection as a reason for enforcement actions against crypto companies, comparing the sector to “the Wild West.”
In the June lawsuit against Coinbase, the SEC, however, didn’t mention Ethereum (ETH), the world’s second-largest cryptocurrency by market cap, among those tokens it asserted to be securities.
On June 28, the San Francisco-based company filed a motion to dismiss the SEC’s lawsuit, arguing that the agency does not have statutory authority over the exchange and that its position regarding its powers is “untenable as a matter of law.”
Editor’s note: This article was updated on July 31, 2023 at 6 am Eastern Standard Time to include comment from Coinbase.
