The Financial Times reported earlier this week that SEC staff had “recommended” Coinbase to suspend trading in all assets except bitcoin before filing the lawsuit against the exchange. And the CEO of Coinbase stated that this “left them no choice but to head to court.”
“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.”
“We really didn’t have a choice at that point, delisting every asset other than bitcoin, which by the way is not what the law says, would have essentially meant the end of the crypto industry in the US,”
– Brian Armstrong quoted by the FT.
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Subsequently, representatives from both Coinbase and the SEC acknowledged that the statement might have been informally made by an SEC employee, but it holds no official authority and does not represent the SEC’s position. There was no formal request from the Commission; and for such a request to be made, it requires a majority vote of the Commissioners.
“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,” – SEC’s spokesperson quoted by Blockworks.
Nonetheless, Gary Gensler, chair of the U.S. Securities and Exchange Commission, has previously stated publicly that most cryptocurrencies, except Bitcoin, should be classified as securities. Even if informal, such a “recommendation” to Coinbase could be seen as another sign that the SEC is actively using this interpretation in its cryptocurrency industry regulation efforts.
The SEC’s authority covers traditional financial instruments like stocks and bonds, but the classification of cryptocurrency tokens remains a contentious topic among U.S. authorities. Subjecting crypto-tokens to SEC oversight would result in far more stringent compliance obligations.
A bunch of U.S. companies are structuring their business models based on the assumption that these tokens are not securities. If they are classified differently, many companies will have to stop their operations immediately.
