Coinbase CEO Reveals SEC Requested Exchange To Halt All Crypto Trading Except Bitcoin Before Lawsuit

Brian Armstrong, the chief executive officer of Coinbase, has revealed that the U.S. Securities and Exchange Commission (SEC) had requested the platform to halt all crypto asset trading in its platform except Bitcoin before the financial watchdog sued it.

The SEC filed a lawsuit against Coinbase, one of the world's largest centralized crypto exchange platforms by trading volume, in June citing violations of the federal securities law, accusing it operates as an exchange, a broker and a clearing house for unregistered securities.

But aside from the Well's Notice that the public was well aware of, it looks like the major Wall Street regulator had made another move against the interest of the Nasdaq-listed company and the broader crypto industry prior to suing the platform. The Coinbase CEO said the regulator asked the company to delist over 200 crypto assets, except the world's first-ever cryptocurrency Bitcoin.

"They came back to us, and they said . . . we believe every asset other than bitcoin is a security," Armstrong said in an interview with Financial Times, before noting, "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."

"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 US," Armstrong added. "It kind of made it an easy choice . . . let's go to court and find out what the court says."

The SEC told Financial Times there was no formal request from the commission's enforcement division asking crypto companies to delist cryptocurrencies from the platform.

"In the course of an investigation, the staff may share its own view as to what conduct may raise questions for the commission under the securities laws," the SEC said.

Armstrong's claim predates the lawsuit filed by the SEC against his crypto business.

The U.S. District Court of the Southern District of New York, on its SEC vs. Ripple Labs ruling, may have shed light on the issue of whether a crypto asset is classified as a security or not.

Judge Analisa Torres recently ruled that XRP is not a security and the sales of the crypto asset conducted by exchanges and employees, as well as its distribution by developers and charities, do not fall as sales of a security.

XRP "is not necessarily a security on its face" except if it was sold to raise funds from institutions, the judge said.

"We're pleased from that decision recognizing the importance of protecting investors on the institutional investors," SEC Chairman Gary Gensler said a few days following the court's ruling. "While disappointed in what they said about retail investors, we're still looking at it and assessing that opinion."