The SEC Recommended Coinbase to List and Trade Only Bitcoin Asset: Brian Armstrong

Jimmy Aki
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Coinbase CEO Brian Armstrong has revealed that the Security Exchange Commission (SEC) had instructed the exchange to delist all tokens except Bitcoin before the ongoing lawsuit began.

The CEO believes that the SEC’s instruction to halt the trade of all digital assets but Bitcoin is a sign of an aggressive stance on crypto trading and an unclarified interpretation of the law that governs the industry.

‘Every Asset Other than Bitcoin Is a Security’

On July 31st, Brian Armstrong, the chief executive of Coinbase, told the Financial Times that the SEC asked the platform to stop trading all crypto assets except Bitcoin ($BTC).

Armstrong stated that the SEC believes that every asset other than Bitcoin is a security and refused to explain how such a conclusion was reached.

After the regulatory beliefs were known, recommendations were cited, which entailed delisting every token on the Coinbase trading platform but Bitcoin.

Armstrong further revealed that the exchange refused the regulatory authority recommendations. He stated that if it had accepted to delist all tokens except $BTC, it would have set a precedent capable of negatively impacting most American crypto businesses and industries.

The decline of the SEC’s recommendation meant incoming litigation that could lead to several court hearings.

Nevertheless, Armstrong cited that the exchange was ready to go to court for better clarification on crypto regulations, which entails the interpretation of security and commodity crypto assets.

As predicted, the SEC slammed Coinbase with a lawsuit for operating as an unregistered securities exchange, broker, and clearing agency on June 6th.

The SEC’s case identified up to thirteen mostly lightly traded cryptocurrencies on Coinbase as securities, asserting that the exchange violated the regulator’s remit by offering them to traders.

Oversight on the Interpretation of Securities & Commodities

The crypto industry has become the most used decentralized finance (DeFi) sector for short and long-term investments.

However, it has been exposed to excessive risk-taking, fraud, and deceptive promotion of securities.
This propelled the U.S. Securities and Exchange Commission (SEC) to apply tight measures to clean the industry.

While some investors believe the SEC measures are within the rights to protect customers, others are concerned that too much regulatory interference and unclarified laws will cause a decline in decentralized appeal.

One of the biggest, unclarified, and most controversial debates in SEC’s regulatory clampdown is whether cryptocurrency should be classified as a security, commodity, or currency.

As of press time, there is no correct answer. However, if crypto assets are deemed a commodity like natural gas and crude oil, their primary regulators would be the Commodity Futures Trading Commission (CFTC).

But if crypto assets are considered securities, such as stocks and bonds, regulatory jurisdiction would fall under the SEC.

Gary Gensler, the chairman of the SEC, had earlier stated that he believes the vast majority of cryptocurrencies are securities, based on the Howey Test.

The Howey Test comes from a Supreme Court ruling 1946 in a case between the SEC v. W.J. Howey Co. According to the Howey Test, an asset is considered a security if money is invested in a common enterprise with an expectation to earn profit through the efforts of others.

Over the recent months, the SEC has shunned promoters marketing new tokens to the public, touting high returns on investment (ROI) based on the efforts of others.

Gensler believes all crypto businesses and active platforms should comply with the law. Failure to do so will trigger continuous pursuit and investigation that follows the fact of the law.

The SEC chairman mentioned Bitcoin as an exception, classifying the asset as a commodity.

SEC vs. Coinbase: Legal Case Update So Far

On July 13th, a pre-motion court case hearing between the SEC and Coinbase occurred at the U.S. District Court of the Southern District of New York (SDNY).

During the hearing, District Court Judge Faila questioned both parties on various aspects, including Coinbase’s initial public offering (IPO) filings, the definition of registered and unregistered assets, and staking.

After both parties’ case hearings, Judge Faila requested a joint “realistic schedule” for more court proceedings.

In response to this request, Paul Grewal, the chief legal officer (CLO) of Coinbase, announced Judge Faila’s approval of Coinbase and the SEC’s joint request to proceed with dates set for court briefing.

Coinbase’s case opening brief is set for August 4th, and the SEC’s opening brief is set for October 3rd.
The U.S SDYN courts explicitly consider the inclusion of amicus briefs in the scheduled case hearing.

Both Coinbase and the SEC are expected to present their amicus support briefs on August 11th and October 10th, respectively. Subsequently, on October 24th, the U.S.-based exchange will respond to the SEC’s litigation documents and briefings.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.