- The SEC requested Coinbase to remove all cryptocurrencies from its platform except for Bitcoin prior to filing a lawsuit against the exchange.
- Armstrong stated to the Financial Times that the SEC's recommendation left them with no alternative but to proceed to court.
The U.S. Securities and Exchange Commission (SEC) requested Coinbase (COIN) to halt trading in all cryptocurrencies except for bitcoin (BTC) before initiating legal action against the cryptocurrency exchange, as reported by the Financial Times, with reference to Coinbase CEO Brian Armstrong.
Armstrong told FT 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 report said.
On June 6, the SEC made a charge against Coinbase, accusing the company of violating federal securities law by allegedly functioning as a broker, an exchange, and a clearinghouse for unregistered securities, specifically targeting 13 different cryptocurrencies, except for bitcoin. In response, Coinbase fiercely contested the SEC's action, arguing that it infringes upon due process and represents an abuse of discretion. This clash between Coinbase and the SEC has now led to an intense legal battle. Meanwhile, Ripple managed to secure a partial victory in a separate case against the SEC, as the court ruled that Ripple's XRP token does not qualify as a security.
“They came back to us, and they said . . . we believe every asset other than bitcoin is a security,” Armstrong said according to the FT. “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.”
Given the SEC recommendation, Armstrong stated that resorting to the court was our inevitable course of action.
The SEC informed the Financial Times that its enforcement division did not issue any formal requests for "companies to delist crypto assets."
“In the course of an investigation, the staff may share its own view as to what conduct may raise questions for the commission under the securities laws,” it added, according to the FT report.
SEC Chair Gary Gensler has previously implied that all cryptocurrencies, except for Bitcoin, may be considered securities. Armstrong's recent disclosures indicate that the SEC possibly classified Ether, the second-largest cryptocurrency, as a security before taking legal action against Coinbase. It's worth noting that Gensler, along with the four SEC commissioners and the SEC staff, have expressed varying opinions on this matter, which may not necessarily represent the official stance of the institution.
CoinDesk's requests for comment went unanswered by both the SEC and Coinbase at the time of reporting.