SEC’s Attempt to Broaden Regulatory Authority Over the Crypto Market
The US Securities and Exchange Commission (SEC) recently asked Coinbase. The Nasdaq-listed cryptocurrency exchange, to suspend trading in all cryptocurrencies except bitcoin. This request came prior to the SEC’s legal action against Coinbase for failing to register as a broker. The move signals the agency’s intent to assert regulatory authority over a broader segment of the crypto industry.
The SEC Identifies 13 Cryptocurrencies as Securities
Coinbase CEO Brian Armstrong disclosed that the SEC’s case targeted 13 cryptocurrencies. Mostly lightly traded, on the exchange’s platform, classifying them as securities. Coinbase allegedly fell under the SEC’s regulatory jurisdiction by offering customers these assets. Additionally, the SEC insisted that all assets other than bitcoin were securities. Also, leaving Coinbase with no choice but to delist over 200 tokens.
The Implications for the Crypto Industry in the US
Had Coinbase agreed to the SEC’s request, it could have set a concerning precedent, potentially pushing the majority of American crypto businesses to operate outside the law unless they registered with the commission. Armstrong stated that such a decision would have effectively marked the end of the crypto industry in the US, given that many companies built their business models assuming these tokens weren’t securities.
SEC’s Ongoing Efforts to Regulate the Crypto Market
Oversight of the crypto industry has long been ambiguous, with both the SEC and the Commodity Futures Trading Commission (CFTC) vying for control. Gensler, the chair of the SEC, has previously expressed his view that most cryptocurrencies, except bitcoin, are securities. The recommendation to Coinbase indicates that the SEC has adopted this stance to regulate the industry further.
Uncertainty Surrounding Crypto Token Classification
While the SEC has not formally requested companies to delist crypto assets, the enforcement division may share its views on questionable conduct under the securities laws during investigations. The SEC’s oversight could bring stricter compliance standards, impacting exchanges that provide custody services and engage in borrowing and lending practices.
The Future of the Crypto Industry in the US
The absence of ether, the second-largest cryptocurrency, from the SEC’s case against Coinbase, and its exclusion from the list of “crypto asset securities” in the lawsuit against Binance, adds to the complexity of token classification. Many American companies may have to halt operations if they are told that their crypto tokens are securities, leading to potential interventions from Congress.
In conclusion, the SEC’s request to Coinbase to delist all cryptocurrencies except bitcoin reveals the agency’s ambition to extend regulatory oversight over the crypto market. The implications of such actions could significantly impact the future of the crypto industry in the United States.