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The US Securities and Exchange Commission asked Coinbase to halt trading in all cryptocurrencies other than bitcoin prior to suing the exchange, in a sign of the agency’s intent to assert regulatory authority over a broader slice of the market. Coinbase chief executive Brian Armstrong told the Financial Times that the SEC made the recommendation before launching legal action against the Nasdaq-listed company last month for failing to register as a broker.
The SEC’s case identified 13 mostly lightly traded cryptocurrencies on Coinbase’s platform as securities, asserting that by offering them to customers the exchange fell under the regulator’s remit. But the prior request for Coinbase to delist every one of the more than 200 tokens it offers — with the exception of flagship token bitcoin — indicates that the SEC, under chair Gary Gensler, has pushed for wider authority over the crypto industry.
“They came back to us, and they said . . . we believe every asset other than bitcoin is a security,” Armstrong said. “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.”
If Coinbase had agreed, that could have set a precedent that would have left the vast majority of the American crypto businesses operating outside the law unless they registered with the commission.
“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,” he said. “It kind of made it an easy choice . . . let’s go to court and find out what the court says.”
