Coinbase, the US-based crypto exchange, was requested by the SEC to halt trading in all cryptocurrencies except for bitcoin, according to an interview with the company’s CEO, Brian Armstrong.
Coinbase didn’t do that, with Armstrong stating that complying with the SEC's request “would have essentially meant the end of the crypto industry in the US” — another tight standoff between regulators and crypto companies in the industry’s short existence.
Bitcoin supreme
Relative to the crypto-mania of 2021, the space has had a relatively muted 12 months. NFTs have, thankfully, mostly disappeared, and the collapse of exchanges like FTX have sobered an industry that was once moving at breakneck speed. But, despite there now being over 22,000 cryptocurrencies available, with a total combined market capitalization of around $1.1 trillion, the original — bitcoin — is still by far the most prominent, with a market cap roughly equivalent to the next 99 largest cryptocurrencies combined.
Howey’s decision
The SEC's request to Coinbase would have meant delisting over 200 tokens that the exchange offers, leaving only bitcoin untouched. They arrived at that conclusion thanks to the regulator's preference for the Howey Test, which considers four criteria to determine if a transaction qualifies as a security.
According to Gary Gensler, the SEC's chair, "most crypto tokens are investment contracts under the Howey Test," placing them firmly under the SEC's regulatory umbrella. However, bitcoin stands apart in Gensler's eyes: he views it as a commodity due to its decentralized nature, thus exempting it from the Howey Test and placing it under the jurisdiction of the Commodity Futures Trading Commission.
