Coinbase CEO Exposes SEC’s Pre-Lawsuit Attempt to Halt Cryptocurrency Trading Beyond Bitcoin
In a recent report by the Financial Times, Coinbase CEO Brian Armstrong revealed that the U.S. Securities and Exchange Commission (SEC) had approached Coinbase, urging them to suspend trading in all cryptocurrencies except bitcoin (BTC) before initiating legal action against the renowned crypto exchange.
According to Armstrong’s statement to FT, the SEC made this recommendation due to Coinbase’s alleged failure to register as a broker. Subsequently, on June 6, the SEC charged Coinbase with violating federal securities law, accusing the platform of functioning as a broker, exchange, and clearinghouse for unregistered securities, excluding bitcoin but encompassing 13 other cryptocurrencies. In response, Coinbase vehemently contested the SEC’s actions, asserting that they were infringing on due process and representing an abuse of discretion.
As the legal dispute between Coinbase and the SEC escalated, another notable crypto player, Ripple, experienced a partial triumph in their case against the SEC. The court ruled that Ripple’s XRP token did not qualify as a security.
Armstrong recounted the SEC’s stance, stating, “They came back to us and declared that they considered every asset, except bitcoin, to be a security.” This declaration contradicted Coinbase’s understanding of the law, prompting them to inquire about the rationale behind the SEC’s conclusion. However, the SEC refused to provide an explanation, instead demanding that Coinbase delist all cryptocurrencies except bitcoin.
Faced with this ultimatum, Armstrong felt that they had no alternative but to resort to legal action. In response, the SEC denied making formal requests for companies to delist crypto assets. The SEC clarified that during investigations, their staff might share their views on conduct that might raise concerns under securities laws.
SEC Chair Gary Gensler’s prior comments have suggested that cryptocurrencies other than bitcoin ought to be classified as securities. Armstrong’s revelations imply that the SEC had deemed Ether, the second-largest cryptocurrency, a security even before initiating their legal case against Coinbase.
It is noteworthy to mention that Gensler, the four SEC commissioners, and the SEC staff have expressed different opinions on various matters, which may not necessarily reflect the institution’s official position unless explicitly stated.
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