The U.S. Securities and Exchange Commission (SEC) requested that Coinbase, the largest cryptocurrency exchange in the United States, suspend trading in all cryptocurrencies except Bitcoin (BTC). This demand came before the SEC filed a lawsuit against Coinbase in June, accusing the platform of operating as an unregistered securities exchange.
According to a July 31 report by the Financial Times, Coinbase’s CEO, Brian Armstrong, revealed that the SEC recommended delisting more than 200 tokens offered on the platform, designating them as securities, leaving only Bitcoin unaffected.
Per the report, he maintained,
“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.”
Coinbase Didn’t Comply With SEC’s Request
Armstrong explained that complying with this request would have jeopardized the entire crypto industry in the U.S., as it could set a precedent for other businesses to register with the SEC or risk operating outside the law.
Regulation of the crypto industry has been ambiguous, with both the SEC and the Commodity Futures Trading Commission (CFTC) vying for control. The SEC’s recent actions against Coinbase, Binance, and other crypto giants demonstrate its intent to assert ultimate regulatory authority, particularly with Chairman Gary Gensler’s belief that most cryptocurrencies, except Bitcoin, should be classified as securities.
The SEC’s demand for Coinbase to halt trading in non-Bitcoin cryptocurrencies underscores its aim to tighten oversight over the market. However, the lawsuit is still ongoing, and its outcome could significantly impact the crypto industry’s operations in the United States
If the SEC succeeds, Coinbase might have to register as a securities exchange, leading to stricter compliance standards and potentially limiting crypto trading opportunities for U.S. investors.
The Call for Regulatory Clarity
Amidst the ongoing legal battles, there is a ray of hope for the crypto industry. The principal congressional committee has given initial approval to a set of clear regulations for digital assets, marking a pivotal step toward establishing a comprehensive regulatory framework for cryptocurrencies.
This development is being hailed as a significant milestone, as the industry has long sought regulatory clarity to foster innovation, consumer protection, and investment opportunities in the digital asset space.
There are hopes that this progress will lead to a more well-defined regulatory landscape akin to that of other crypto-friendly jurisdictions, such as the United Kingdom, European Union, Singapore, and Australia.
Moreover, industry participants believe that if there is insufficient clarity, regulators such as the SEC should refrain from pursuing legal action against players in the absence of guidelines to guide them.