In a surprising revelation, Coinbase CEO Brian Armstrong claimed that the U.S. Securities and Exchange Commission (SEC) had previously asked the cryptocurrency platform to halt trading in all digital currencies except Bitcoin. This unexpected directive was issued before the SEC launched a lawsuit against the popular cryptocurrency exchange in June, as reported by the Financial Times.
Coinbase’s Bold Stance
According to Armstrong, complying with the SEC’s demand to delist every asset other than Bitcoin would have signaled the end of the US crypto industry. This directive was seen as a deviation from existing laws and triggered Coinbase’s decision to battle it out in court.
Armstrong stated, “It kind of made it an easy choice … let’s go to court and find out what the court says.”
Accusations and Counter-Arguments
The SEC alleged that Coinbase was operating unlawfully due to its failure to register as an exchange. The regulator further accused Coinbase of trading at least 13 crypto assets, such as Solana, Cardano, and Polygon, which it deemed as securities needing registration. In response to the accusations, Coinbase and other crypto companies argue that SEC rules are ambiguous and that the agency is overstepping its authority by trying to regulate them.
The SEC’s enforcement division denied making formal requests for companies to delist crypto assets, adding that staff may share views on conduct potentially raising legal concerns during an investigation.
Crypto Industry in the Regulatory Crosshairs
The lawsuit against Coinbase is part of SEC Chair Gary Gensler’s larger initiative to assert control over the crypto industry. Describing the crypto landscape as a “Wild West,” Gensler believes the industry has eroded investor trust in the U.S. capital markets. The legal battle with Coinbase followed a similar lawsuit against Binance in June.
A Ripple in the Crypto Pond
In a twist of irony, Australian Lawyer and digital asset enthusiast Bill Morgan pointed out that at the time of the SEC’s request, Coinbase had already suspended trading of XRP, a token recently declared by a court as not a security. Morgan insinuated that the court’s reasoning, in this case, could likely apply to most tokens on the Coinbase exchange, challenging the SEC’s stance on crypto assets.
