Coinbase's CEO said a demand from U.S. officials to cease trading all assets except Bitcoin would have spelled the end of the cryptocurrency industry as we know it.
In an interview published Monday by the Financial Times, Brian Armstrong, CEO of cryptocurrency exchange platform Coinbase, revealed the SEC suggested his company make the change while the agency prepared to sue the firm for allegedly operating as an unregistered broker.
Had Coinbase complied with the SEC’s request, it would have delisted every one of the more than 200 tokens it offers, apart from Bitcoin—the world’s most traded cryptocurrency.
This would have set a precedent that meant most American crypto firms would have been left operating illegally unless they registered with the SEC, according to the FT.
“We really didn’t have a choice at that point. Delisting every asset other than Bitcoin, which by the way is not what the law says, would have essentially meant the end of the crypto industry in the U.S.,” Armstrong told the publication of Coinbase’s decision to reject the SEC’s request.
“It kind of made it an easy choice…let’s go to court and find out what the court says.
“They came back to us, and they said…we believe every asset other than Bitcoin is a security.
"And, we said, well how are you coming to that conclusion, because that’s not our interpretation of the law. And they said, we’re not going to explain it to you, you need to delist every asset other than Bitcoin.”
It comes following a row over how cryptocurrencies should be classified and as a result, regulated.
SEC Chair Gary Gensler has made it clear he believes most cryptocurrencies should be classified as securities, but he has conceded that Bitcoin is an exception that ought to be classed as a commodity.
The classification of the assets determines which regulator—the SEC or the Commodity Futures Trading Commission (CFTC)—oversees them.
In its June lawsuit, the SEC accused Coinbase of failing to register with the agency as a broker, national securities exchange, and clearing agency. It also alleged that some crypto assets offered on Coinbase’s exchange—including popular tokens Solana, Cardano, and Polygon—were unregistered securities.
It came less than three months after Nasdaq-listed Coinbase revealed it had received a Wells notice—warning that it was facing a legal investigation—from the SEC.
A spokesperson for the SEC was not immediately available for comment when contacted by Fortune.
Crypto troubles
Cryptocurrencies like Bitcoin are notoriously volatile, and being prone to wild swings in value has prompted warnings from the likes of Warren Buffett and JPMorgan CEO Jamie Dimon about their worth as investments.
In the wake of the collapse of crypto exchange FTX last year, regulators have taken steps to crack down on malpractice allegedly being undertaken in the crypto sector, suing Binance and Coinbase in quick succession last month.
“You simply can’t ignore the rules because you don’t like them or because you’d prefer different ones: The consequences for the investing public are far too great,” Gurbir S. Grewal, director of the SEC’s division of enforcement, said in a statement as the agency sued Coinbase.
Three months earlier, the CFTC took its own legal action against Binance and its CEO, Changpeng Zhao, alleging that the company had violated the Commodity Exchange Act and operated an "illegal" exchange and "sham" compliance program.
The legal action weighed on an already suffering crypto industry, with crypto assets across the board still reeling from 2022’s widespread selloff that became known as the Crypto Winter.
Last year’s downturn saw more than $200 billion wiped off the market in a single day back in June, with some experts predicting the phenomenon—which saw many crypto investors’ life savings wiped out overnight—could last through 2023 and possibly into 2024.
Meanwhile, 2022 also brought the spectacular implosion of crypto exchange FTX, leading to speculation late last year over whether the world was witnessing “the end of crypto,” with some heralding FTX’s collapse as the cryptocurrency market’s “Lehman moment.”
Bitcoin has recovered somewhat from last year’s lowest point, but at today’s price of just over $29,000 the digital token is still far from its all-time high of nearly $69,000.
