Why Did the SEC Ask Coinbase to Only Trade Bitcoin?

In a recent interview with the Financial Times, Coinbase’s CEO revealed that The SEC had asked Coinbase to delist over 250 cryptos except Bitcoin.

The SEC has long held that all cryptocurrencies except Bitcoin qualify as securities and therefore come under its jurisdiction. Recalling the situation, Coinbase CEO Armstrong explained: “They (the SEC) came back to us, and they said […] we believe every asset other than bitcoin is a security.” Let’s discover more about this important news.

SEC – Coinbase Misanderstanding

When quizzed on how they arrived at such a conclusion, the SEC allegedly declined to explain further but instead asked Coinbase to “delist every asset other than Bitcoin.” Coinbase is the largest crypto exchange in the US. However, the crypto trading platform has not had the best of relationships with US regulators, especially the Gary Gensler-led SEC.

A Coinbase spokesperson has clarified that “the views shared in the FT article may have represented the views of some staff at the time, but did not represent those of the Commission more broadly.”

Furthermore, an SEC spokesperson said in a statement that “SEC staff does not ask companies to delist crypto assets. In the course of an investigation, the staff may share its view as to what conduct may raise questions for the Commission under the securities laws.”

SEC Sued Coinbase for Selling Unregistered Securities

Armstrong revealed that the SEC made the alleged recommendation before launching a lawsuit against Coinbase for selling unregistered securities. On June 6th, the SEC accused Coinbase of operating as a clearinghouse, broker, and exchange for unregistered securities, thereby breaking federal securities law.

The commission further claimed that Coinbase’s staking service offered at least 13 crypto assets that it considered unregistered securities. Some of the tokens include

Coinbase and the SEC are currently locked in a legal battle. The US regulator also sued Binance for allowing US customers access to its global platform and offering unregistered securities. The SEC also accused Binance CEO Changpeng CZ Zhao of misusing and commingling customer funds. Robbin Hood was another exchange in this list.

The SEC under Gensler has made bold claims about the crypto industry. While many believe the recent ruling that XRP is not a security was a big blow to the regulator, there is still a need for clarity.

Armstrong noted in his FT interview that had he agreed to the SEC’s demands, Coinbase would have set the wrong precedent for US crypto companies. The SEC would have required crypto firms to delist all cryptocurrencies and slowly enforce its rule on the industry. 

Clear Regulatory Rules are the Only Way 

Different US agencies believe the crypto industry is within their jurisdiction. This lack of clarity hasn’t made it easier for crypto companies to operate. There’s already been an exodus of US firms to European companies thanks to the clarity provided by the Market in Crypto Assets (MiCA) law.

The US Congress should provide a holistic framework for the crypto market in the US to thrive. A lack of clarity could relegate the US from the race to become a crypto hub.

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