Image source: bitcoin.com

In a recent revelation, Coinbase CEO Brian Armstrong disclosed that the U.S. Securities and Exchange Commission (SEC) had pressured the crypto exchange to halt trading in all cryptocurrencies except Bitcoin before launching a lawsuit against the company. This move by the SEC is seen as an attempt to exert regulatory authority over a broader segment of the cryptocurrency market.

SEC’s Directive to Coinbase

According to Armstrong, the SEC had made the recommendation prior to initiating legal action against Coinbase for allegedly operating as an unregistered broker. The regulatory agency had identified 13 cryptocurrencies offered on the platform as securities, leading it to assert jurisdiction over the exchange. 

However, the more concerning aspect was the SEC’s insistence that Coinbase delists over 200 other tokens, leaving only Bitcoin available for trading on its platform.

Coinbase’s Response and Concerns

Armstrong stated that Coinbase disagreed with the SEC’s interpretation that all assets, except Bitcoin, are securities. When the exchange sought clarification on the basis for this classification, the SEC refused to provide an explanation, merely instructing Coinbase to delist the mentioned assets.

The CEO expressed significant concerns about complying with the SEC’s directive. If Coinbase had agreed to delist all tokens except Bitcoin, it could have set a precedent that would force the majority of American crypto businesses to operate outside the law unless they registered with the commission. Such a scenario would have had severe implications for the crypto industry in the United States.

Seeking Clarity Through Legal Action

In light of the potential consequences, Coinbase made the decision to challenge the SEC’s directive in court. Armstrong emphasised that delisting all assets, as directed by the SEC, would have essentially meant the end of the crypto industry in the U.S. 

As such, the company opted for the legal route to seek clarity on the matter and obtain a court ruling on the classification of cryptocurrencies as securities.

SEC’s Regulatory Approach and Industry Implications

The SEC’s stance on crypto regulation has been a contentious issue, with the agency’s chair, Gary Gensler, expressing his belief that most cryptocurrencies, except Bitcoin, are securities. Armstrong’s revelation indicates that the SEC has indeed been attempting to expand its regulatory authority over the broader crypto market, raising concerns among industry players.

Moreover, the lack of a clear regulatory framework for cryptocurrencies has caused uncertainty among American businesses operating in the crypto space. Many companies have built their business models based on the assumption that certain tokens are not securities, and a contrary interpretation by the SEC could force them to halt operations immediately.

The Legal Battle and Ripple’s Precedent

Ripple-XRP-Coin

Coinbase is currently engaged in a legal battle with the SEC over the regulatory issues raised by the agency. 

In a separate case, Ripple, the company behind the XRP token, recently scored a partial victory when the court ruled that XRP is not a security. This ruling has provided some clarity to the crypto industry but has also highlighted the need for a comprehensive regulatory framework.

Final thought

As the legal battle between Coinbase and the SEC unfolds, the crypto industry in the United States awaits further clarity on the regulatory landscape. The outcome of this case will have far-reaching implications for how cryptocurrencies are classified and regulated in the country. Until then, the industry remains in a state of uncertainty, with businesses and investors closely monitoring the developments.