The US Securities and Exchange Commission (SEC) reportedly asked Coinbase, one of the largest cryptocurrency exchanges in the US, to cease trading all digital assets except Bitcoin, prior to its legal action against the platform.
The move signals the regulator's intent to extend its authority over a wider scope of the crypto market. SEC Chairman Gary Gensler has been vocal about his belief that most cryptocurrencies, except Bitcoin, are securities.
However, his stance on Ethereum, the second-largest cryptocurrency, and a host of altcoins remains unclear.
In a recent interview with the Financial Times, Coinbase CEO Brian Armstrong revealed that the SEC had recommended delisting all but Bitcoin from the platform before filing a lawsuit against the Nasdaq-listed firm last month for failing to register as a broker. According to Armstrong, had Coinbase agreed to this, it would have set a precedent that could see the majority of American crypto businesses operating unlawfully unless they registered with the SEC.
While the SEC's lawsuit identified 13 cryptocurrencies on Coinbase's platform as securities, it did not feature Ethereum or several other major tokens, adding to the uncertainty around Gensler's position on these assets.
If the SEC were to gain oversight, it would imply far more stringent compliance standards for crypto exchanges.
Regulatory clarity in the US crypto market remains elusive, and businesses built on the assumption that these crypto tokens aren’t securities may have to halt operations. The SEC has not yet provided official commentary on the implications of a potential settlement that would involve Coinbase delisting every token except Bitcoin.
This leaves the future of the crypto industry in the U.S. hanging in the balance as any major changes could significantly impact public offerings or retail trading of tokens.
However, the recent Ripple ruling injected some optimism into the battered cryptocurrency industry.