Coinbase CEO Brian Armstrong recently unveiled that the U.S. Securities and Exchange Commission (SEC) had advised the popular crypto exchange to halt trading for all cryptocurrencies, with the exception of Bitcoin, before initiating legal action. This move has raised speculation about the SEC’s intention to extend its regulatory control to a wider scope within the crypto market.

In an interview with the Financial Times, Armstrong revealed, “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.”

The SEC’s lawsuit against Coinbase specifically identified 13 cryptocurrencies on the platform as securities, implying that by offering them to customers, the exchange had fallen under the regulatory purview. However, the request to delist over 200 tokens, excluding Bitcoin, signals the SEC’s inclination to expand its authority over the broader crypto industry under the leadership of Chair Gary Gensler.

Armstrong has expressed concerns about the potential implications of this directive, stating, “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… It kind of made it an easy choice… let’s go to court and find out what the court says.”

The SEC’s stance holds substantial consequences for the U.S. crypto industry. Compliance with the SEC’s directive by Coinbase could have set a precedent that left a significant portion of American crypto businesses operating outside legal boundaries unless they registered with the commission.

The regulatory approach adopted by the SEC in relation to cryptocurrencies has been a topic of controversy. The agency argues that most cryptocurrencies, excluding Bitcoin, are securities. This interpretation has guided its attempts to regulate the industry, as evidenced by the recommendation to Coinbase.

On June 6, the SEC filed a complaint against Coinbase, accusing the company of operating as an unregistered securities exchange, broker, and clearing agency. Additionally, Coinbase was also accused of failing to register its crypto asset staking-as-a-service program.

The SEC’s actions against Coinbase and their implications for the broader crypto industry have sparked intense debate. “There are a bunch of American companies who have built business models on the assumption that these crypto tokens aren’t securities,” noted Charley Cooper, former CFTC chief of staff. “If they’re told otherwise, many of them will have to stop operations immediately.”

In a pre-motion conference, Judge Katherine Polk Faila of the U.S. District Court for the Southern District of New York raised questions about the SEC’s ability to safeguard investors.

As of press time, the price of Bitcoin stood at $29,446, further amplifying the significance of these events for the crypto market.

The future implications of Coinbase’s legal battle with the SEC remain uncertain, but the outcome will undoubtedly shape the regulatory landscape for the crypto industry. It is essential for market participants to closely monitor the developments and engage in informed discussions to ascertain the long-term impact on the sector as a whole.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The NFT and cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.