The SEC made the request before suing Coinbase, Armstrong said in a Monday (July 31) Financial Times (FT) report.
Armstrong, whose company is being accused by the SEC for failing to register as a broker, said the agency’s request was not possible. Had the company agreed, the FT reported, it could have established a precedent that would have put most American crypto firms outside the bounds of the law unless they registered with the SEC.
“They came back to us, and they said … we believe every asset other than bitcoin is a security,” Armstrong said, per the report. “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 U.S.,” he added. “It kind of made it an easy choice … let’s go to court and find out what the court says.”
Reached for comment by PYMNTS, an SEC spokesperson offered this response:
“SEC staff does not ask companies to delist crypto assets. 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.”
Coinbase, the largest crypto platform in the U.S., has been engaged in a legal battle with the SEC for years. The fight culminated in last month’s lawsuit, in which the SEC accused Coinbase of making “billions of dollars unlawfully facilitating the buying and selling of crypto asset securities” since 2019.
The company, through its general counsel Paul Grewal, responded by criticizing what it called the SEC’s “reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry.”
The company also filed a counterclaim, saying the SEC had no standing to bring a case against Coinbase, and the SEC took issue with the arguments raised in the counterclaim in a response filed earlier this month.
“Coinbase, a multibillion-dollar entity advised by sophisticated legal counsel, argues it was unaware that its conduct risked violating the federal securities laws,” the SEC said, adding that Coinbase’s public filings show that a possible risk to its investors include the fact that listed assets could be considered securities.
For all PYMNTS crypto coverage, subscribe to the daily Crypto Newsletter.