The US Securities and Exchange Commission (SEC) urged Coinbase to halt trading in all cryptocurrencies except bitcoin before suing the exchange, indicating the agency’s intention to assert regulatory authority over a broader segment of the market. The SEC’s case identified 13 cryptocurrencies on Coinbase as securities, requiring the exchange to register as a broker. However, prior to the lawsuit, the SEC had requested Coinbase to delist all but bitcoin, signaling an attempt to gain wider control over the crypto industry. If Coinbase had complied, it could have set a precedent where most US crypto businesses operated outside the law unless registered with the commission.
The oversight of the crypto industry has been ambiguous, with both the SEC and the Commodity Futures Trading Commission vying for control. SEC’s official position is most cryptocurrencies, excluding bitcoin, are securities. However, Ether, the second-largest cryptocurrency, was not included in the SEC’s case against Coinbase. The SEC clarified that its enforcement division did not formally request companies to delist crypto assets during investigations.
The debate over whether all crypto tokens should fall under the SEC’s jurisdiction continues, as it would bring stricter compliance standards. Many US companies have built business models assuming that crypto tokens are not securities, and if ruled otherwise, they may have to halt operations. The implications for the rest of the industry remain uncertain, and public offerings or retail trading of tokens may require intervention from Congress. The SEC declined to comment on the impact of a settlement involving Coinbase delisting all tokens except bitcoin.
