The US Securities and Exchange Commission (SEC) has been cracking down on the crypto industry, claiming that most digital assets are securities that need to comply with the same rules as traditional financial products. However, one of the biggest crypto exchanges in the US, Coinbase, has challenged the SEC’s authority and refused to stop trading all crypto tokens except bitcoin.
According to Coinbase CEO Brian Armstrong, the SEC asked the company to delist every asset other than bitcoin from its platform, without explaining how they determined that they are securities. Armstrong said that complying with this request would have been “the end of the crypto industry in the US”, as it would have prevented millions of Americans from accessing a new and innovative form of finance. He also said that the SEC did not make any formal requests, but rather shared its own views as part of an investigation.
Coinbase decided to take the matter to court, after the SEC filed a lawsuit against it in June 2023. The SEC accused Coinbase of operating as an unregistered securities exchange and broker, and making billions of dollars of profit while violating the securities laws. The SEC also argued that nine coins traded on Coinbase are unregistered securities, which could have implications for the agency’s jurisdiction over cryptocurrencies.
The lawsuit is the first of its kind and could set a precedent for how crypto assets are regulated in the US. The crypto industry has long argued that cryptocurrencies are a new kind of digital asset that require bespoke rules and regulations, rather than being shoehorned into existing frameworks. The SEC, on the other hand, has maintained that most crypto offerings are securities that should face the same government regulations on Wall Street as stocks and bonds.
The outcome of the case could have significant implications for the future of crypto in the US, as well as for other countries that are looking to establish their own regulatory frameworks. The case could also affect the innovation and growth of the crypto sector, which has been attracting more investors, entrepreneurs, and developers in recent years. The crypto industry is hoping for a favorable ruling from the court, or a legislative intervention from Congress, that would provide more clarity and certainty for crypto businesses and users.