According to Coinbase director Brian Armstrong, prior to the lawsuit, the US Securities and Exchange Commission (SEC) demanded that the cryptocurrency exchange stop trading all cryptocurrencies except bitcoin.
Earlier, the SEC identified 13 cryptocurrencies in the lawsuit that, in its opinion, are traded on Coinbase "as securities" falling under the regulator's jurisdiction. However, according to the leader of the cryptocurrency exchange, the regulator insists on broader powers in the crypto industry.
"They said that any asset, other than bitcoin, is a security. We asked how they came to this conclusion, as it interprets the law differently. But they refused to explain, demanding to remove all digital assets except the main one," Armstrong says.
If Coinbase had agreed, it could have set a precedent that would leave the vast majority of American crypto businesses outside the law if they do not register with the commission.
"At that time we really didn't have a choice. But removing all assets would essentially mean the end of the crypto industry in the US. We will see what the court says," Armstrong adds.
Regulatory oversight of the crypto industry has so far been a gray area where control was fought over by the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC). Earlier this year, the latter sued Binance - three months before the SEC filed its own complaint against the cryptocurrency exchange Changpeng Zhao.
SEC Chairman Gary Gensler previously stated that most cryptocurrencies, except bitcoin, in his opinion, are securities. However, judging by Coinbase's recommendations, the commission adopted such a statement for its own attempts to regulate the industry.
Ethereum, the second largest cryptocurrency, which is the foundation for many industry projects, was not mentioned in the regulator's arguments against the exchange or in the list of "securities - cryptocurrency assets" specified in the SEC's lawsuit against Binance.
SEC stated that it did not send any official requests to "companies to withdraw cryptocurrency assets."
"During the investigation, employees may share their own views on what behavior may raise questions from the commission in accordance with securities laws," the commission added.
Stocks, bonds, and other traditional financial instruments fall under the jurisdiction of the SEC, but US authorities continue to debate whether all or certain specific cryptotokens fall into this category.
Supervision by the SEC will bring much stricter standards. Cryptocurrency exchanges typically also provide storage and lending services to clients - a combination of practices that are impossible for regulated securities commission companies.
"There are a bunch of American companies that have built business models assuming that cryptotokens are not securities. If they are told otherwise, many will have to stop working immediately," said Charlie Cooper, former CFTC staff director.
Source: FT
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