On July 31, the Financial Times reported that the U.S. Securities and Exchange Commission (SEC) requested Coinbase to cease all cryptocurrency trades except for bitcoin before it proceeded to file a lawsuit against the platform in June.
This information was brought forward by Coinbase CEO, Brian Armstrong.
Armstrong stated in an interview with the Financial Times,
"We didn't really have an alternative then. The action of delisting all assets except bitcoin, which isn't even stated by the law, would have effectively signalled the end of the cryptocurrency sector in the U.S."
"It somewhat made the decision easy for us... we decided to take the matter to court to hear its verdict."
The SEC had alleged that Coinbase was operating unlawfully as it failed to register as an exchange and traded at least 13 cryptocurrencies, such as Solana, Cardano and Polygon, which are considered securities that needed to be registered.
According to the SEC, the enforcement division didn't issue official requests for companies to delist cryptocurrency assets. The Financial Times quoted the SEC saying,
"During an investigation, our staff may express their viewpoint on behaviors that may raise questions under the securities laws."
Responding to the report by the Financial Times, a representative from Coinbase refuted the SEC's claim stating that the commission never indicated that all assets, other than Bitcoin, were securities. The spokesperson added that such official requests would require the commission's full consensus.
The spokesperson also emphasized,
"We are maintaining an ongoing dialogue with the Commission, but we strongly believe that a transparent and fair rulemaking process and Congressional actions offer the most constructive way forward for U.S. crypto users and companies developing the cryptoeconomy in the U.S."
In a related development, the SEC also filed a lawsuit against Binance in June. Both these lawsuits are a part of SEC Chair Gary Gensler's attempt to gain control over the cryptocurrency industry.
Gensler has referred to the crypto industry as the "Wild West," implying that it has led to a reduction in investor confidence in the U.S. capital markets.
However, crypto companies argue that the SEC's rules are ambiguous, and the commission is overstepping its boundaries by trying to regulate them.