SEC Required Coinbase to Trade Only Bitcoin, Exclude Ethereum and All Other Cryptos, Reports FT
Luisa Crawford Jul 31, 2023 05:00
On July 31, a report by the Financial Times reported that the U.S. Securities and Exchange Commission (SEC) had requested Coinbase to cease all cryptocurrency trading, including Ethereum, with Bitcoin being the only exception, before taking legal action against the company.
On July 31, a report by the Financial Times reported that the U.S. Securities and Exchange Commission (SEC) had requested Coinbase to cease all cryptocurrency trading, including Ethereum, with Bitcoin being the only exception, before taking legal action against the company.
Coinbase CEO Brian Armstrong disclosed the SEC's stance, stating that we believe all assets except Bitcoin are securities, but the regulatory body did not clarify how this conclusion was reached.
Armstrong further explained that the SEC had proposed this course of action the previous month, prior to filing a lawsuit against the Nasdaq-listed company. The basis for the lawsuit was Coinbase's failure to register as a broker. Armstrong expressed his belief that compliance with the SEC's request might have established a precedent, potentially compelling most U.S. crypto companies to operate outside legal boundaries unless registered with the commission.
The SEC's allegations against Coinbase include engaging in an unregistered securities offering through its staking-as-a-service program since 2019. On June 6, 2023, the SEC formally charged Coinbase with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.
Additionally, the SEC accused Coinbase of failing to register the offer and sale of its crypto asset staking-as-a-service program, a platform that enables customers to profit from the "proof of stake" mechanisms of specific blockchains. The SEC's complaint seeks a range of legal remedies, including injunctive relief, disgorgement of ill-gotten gains plus interest, penalties, and other equitable relief. The announcement of the lawsuit led to a 12% decline in Coinbase's stock on that day.
In its case against Coinbase, the SEC identified 13 smaller cryptocurrencies traded on the platform as securities. These include SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO. The SEC contends that by offering these cryptocurrencies, the trading platform falls under regulatory jurisdiction, further complicating the legal landscape for cryptocurrencies in the United States.
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