- Coinbase CEO Brian Armstrong has claimed that the SEC has told the exchange to remove all cryptocurrencies except Bitcoin before the agency sued
- The SEC has long believed that only Bitcoin is a commodity, considering other tokens as securities, and refused to provide further explanations for their classification
- Instead of complying, Coinbase challenged the SEC’s stance in court, seeking clarity on the legal status of various cryptocurrencies
Coinbase CEO Brian Armstrong has claimed that the Securities and Exchange Commission (SEC) told the exchange to remove every coin apart from Bitcoin prior to its lawsuit. Armstrong told the Financial Times that the SEC advised Coinbase to delist over 200 tokens, with the exception of BTC, which they considered as the only non-security asset. Coinbase’s failure to register as a broker, which it says has been rendered impossible by the SEC’s approach, triggered the agency’s legal action, wherein it identified 13 mostly lightly traded cryptocurrencies on the platform as securities.
Comments Reaffirm SEC Belief
The SEC has made no secret of its belief, espoused by its chair Gary Gensler, that only Bitcoin is a commodity, with every other token a being security. According to Armstrong, the SEC refused to elaborate on the rationale behind this classification, further complicating the situation. Had Coinbase complied with the request, it could have set a precedent that would have left most American crypto businesses operating illegally unless they registered with the SEC. It would also have decimated Coinbase’s bottom line.
Instead, Coinbase decided to challenge the SEC’s stance in court to ascertain the legal standing of various cryptocurrencies, its cause helped by a recent verdict in the SEC vs Ripple case.
SEC and CFTC Playing Pass the Parcel
The regulatory oversight of the crypto industry had previously been uncertain, with both the SEC and the Commodity Futures Trading Commission (CFTC) vying for control over the sector (or, perhaps more accurately, trying to foist it onto the other).
Notably, the second-largest cryptocurrency, Ether, was not included in the SEC’s case against Coinbase, nor in the list of “crypto asset securities” specified in the SEC’s lawsuit against Binance. This would have provided a headline-grabbing move, although Ethereum staking could well fall foul of securities laws.
