Coinbase Claims SEC Requested Ceasing of Cryptocurrency Trading, Except for Bitcoin

According to Brian Armstrong, the CEO of Coinbase and one of the most influential cryptocurrency executives in the world, the U.S. Securities And Exchange Commission (SEC) asked his exchange to cease trading in all cryptocurrencies except for bitcoin before it filed its recent lawsuit against it.

Armstrong’s claims are an interesting addition to the regulatory dynamic for bitcoin under the current SEC leadership, which has reiterated that bitcoin is in a regulatory class by itself among cryptocurrencies as a clearly-defined commodity. This status would place bitcoin under the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), which is generally considered to be more lenient than the SEC. In June 2023, the SEC filed a lawsuit against Coinbase, accusing it of operating without the necessary regulatory clearances.

In a recent interview with the Financial Times, Armstrong claimed that, as part of its battle with the SEC, the agency ordered it to essentially shut down all business activities outside of bitcoin.

“They came back to us, and they said … we believe every asset other than bitcoin is a security,” claimed Armstrong. “…we’re not going to explain it to you, you need to delist every asset other than bitcoin.”

Armstrong underscored that an acquiescence to this demand would set a dangerous precedent, capable of crippling the entire U.S. crypto industry. “We really didn’t have a choice at that point, delisting every asset other than Bitcoin … would have essentially meant the end of the crypto industry in the US. It kind of made it an easy choice … let’s go to court and find out what the court says.”

As of now, the issue seems to remain an open one, as the SEC seeks to reorient its role and authority over the space.

More recently, Coinbase has requested that a federal judge drop the SEC’s lawsuit against it amid downturns in the exchange’s stock price. As this preeminent battle over cryptocurrency regulation in the U.S. unfolds, however, the value of bitcoin itself has remained relatively stable.

In any event, Coinbase has not complied with the SEC’s alleged order and the future of this legal battle could go a long way in determining subsequent cryptocurrency regulation in the U.S.

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