SEC Told Coinbase to Stop Trading in All Cryptos Except Bitcoin Before Suing: FT

Armstrong said the SEC recommendation left them no choice but to head to court.

AccessTimeIconJul 31, 2023 at 4:56 a.m. UTC
Updated Aug 1, 2023 at 4:57 a.m. UTC
  • The SEC asked Coinbase to delist every cryptocurrency except bitcoin before suing the exchange.
  • Armstrong told the Financial Times the SEC recommendation left us no choice but to head to court.

The U.S. Securities and Exchange Commission (SEC) had asked Coinbase (COIN) to stop trading in all cryptocurrencies other than bitcoin (BTC) prior to suing the crypto exchange, according to a Financial Times report, citing Coinbase CEO Brian Armstrong.

“SEC staff does not ask companies to delist crypto assets. In the course of an investigation, the staff may share its own view as to what conduct may raise questions for the Commission under the securities laws,” an SEC spokesperson told CoinDesk.

SEC Chair Gary Gensler, the four SEC commissioners and SEC staff have had different opinions on matters and don't necessarily reflect the institution's position unless expressed as so.

“The interview as published earlier today by the Financial Times omitted critical context regarding our conversations with the SEC in the U.S.," a Coinbase spokesperson told CoinDesk in an email. "Whether deliberately or as a result of an oversight, the author implied that the SEC ordered Coinbase to 'halt all trading of every crypto asset other than Bitcoin.' As stated by the SEC itself further in the article, its “enforcement division did not make formal requests for “companies to delist crypto assets”.

Coinbase further added 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. We continue our discussions with the Commission.."

Armstrong told FT that "the SEC made the recommendation before launching legal action against the Nasdaq-listed company last month for failing to register as a broker," the report said.

On June 6, the SEC charged Coinbase with breaching federal securities law alleging that it was simultaneously operating as a broker, an exchange and a clearinghouse for unregistered securities – namely, 13 different cryptocurrencies but not bitcoin. Coinbase shot back saying the SEC's action violates due process and constitutes an abuse of discretion. Coinbase and the SEC are now embattled in a legal process, even as Ripple scored a partial victory in a case against the SEC, ruling that Ripple's XRP token is not a security.

“They came back to us, and they said . . . we believe every asset other than bitcoin is a security,” Armstrong said according to the FT. “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.”

Armstrong said the SEC recommendation left us no choice but to head to court.

Gensler has previously suggested that all cryptocurrencies other than bitcoin are securities. Armstrong's revelations suggest the SEC viewed Ether, the second-largest cryptocurrency, as a security before suing Coinbase.

FT did not immediately respond to CoinDesk's request for comment.

UPDATE (July 31, 05:35 UTC): Adds details throughout, updates headline.

UPDATE (July 31, 11:55 UTC): Adds comment from Coinbase's spokesperson.

UPDATE (Aug 1, 04:57 UTC): Adds comment from SEC spokesperson.

Edited by Omkar Godbole.


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Amitoj Singh

Amitoj Singh is CoinDesk's regulatory reporter covering India. He holds BTC and ETH below CoinDesk's disclosure threshold of $1,000.

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