- Before filing the lawsuit, SEC told Coinbase to only trade Bitcoin.
- Last month, the SEC sued Coinbase for selling unregistered securities.
Brian Armstrong, CEO of Coinbase, revealed that before suing Coinbase, the SEC ordered the exchange to halt all crypto trading and trade nothing but Bitcoin. This United States Securities and Exchange Commission (SEC) order came in just before the crypto company was pulled over for offering unregistered securities.
Only Trade Bitcoin and Nothing Else: SEC to Coinbase
Coinbase was asked to delist every other cryptocurrency from the exchange and let BTC remain. Brian Armstrong made the shocking revelation in a recent interview. He said that before suing the crypto exchange for unregistered securities, the financial watchdog asked them to delist everything else. He also added that the agency feels that every asset other than BTC is a security.
When the crypto exchange asked the agency for clarification on how they concluded, they simply denied it and explained it was an interpretation of the law.
“They came back to us, and they said… we believe every asset other than Bitcoin is a security. 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.” – Brian Armstrong.
Coinbase vs. SEC: The Infamous Bout
Coinbase even submitted a formal plea to a United States court asking for clarification from the SEC about crypto regulations. On June 6, 2023, the court ordered the financial watchdog to respond. The agency asked for a timeline of the next 120 days to provide clarity requested by the crypto exchange.
As per the lawsuit filed by the SEC against Coinbase, the agency listed 13 assets as securities including Solana (SOL), Cardano (ADA), Polygon (MATIC), FIL, SAND, AXS, NEAR, ICP, DASH, CHZ, NEXO, and VGX. The exchange was also accused of failing to register as a broker with the clearing agency or national securities agency.
According to the agency, Coinbase was trying to circumvent the rules and regulations established by the United States Congress for the U.S. securities market. Armstrong added that the exchange was free of choice then. He further said that; had the crypto exchange abided by the SEC’s instruction, it would have set a wrong precedent and sent a bad message.
Moreover, accepting the agency’s pointers would entail that almost every other crypto business and entity operates outside the law until registered with the SEC. Also, if every exchange delists every crypto asset other than Bitcoin, it would be the end of the crypto industry in the United States.
What Industry Experts Say on Crypto Regulations
Billionaire Mark Cuban and the former SEC official John Reed Stark during a Twitter feud in early July 2023, tried to address the crypto regulation scenario in the United States. The official referred instances like the proposal of Rule 3b-16 of the Securities Exchange Act, Regulation ATS, and Regulation SCI. They claimed that they could bring the desired clarity after implementation.
While Cuban argued for more clarity and transparency in the crypto regulations, there is a general consensus that existing rules need to be updated keeping digital assets in mind. Taking instances of the FTX saga, he said that Japanese users suffered less because, per their rules, clients’ and businesses’ funds were kept separate.
Experts agree that the United States currently needs a comprehensive regulatory framework for digital assets. At the same time, its counterparts are actively preparing and exploring the possibilities of crypto regulations. This scenario has left the U.S. far behind in the race to become a crypto hub or superpower.
