Coinbase Secures Major Win as SEC Drops Lawsuit That Could Have Threatened U.S. Crypto Industry

Trump Administration’s Deregulation Strategy Spurs Hope for Crypto Firms in America / Gabby Jones/Bloomberg/Getty Images/File

America’s leading cryptocurrency exchange, Coinbase, recently celebrated a significant legal victory as the U.S. Securities and Exchange Commission (SEC) announced it would drop a major lawsuit that had the potential to severely impact the cryptocurrency industry in the United States. This decision comes after the Trump administration made promises to relax regulations surrounding digital currencies, such as Bitcoin.

The SEC had initially filed a lawsuit against Coinbase in June 2023, accusing the exchange of operating as an unregistered broker. A similar legal action was taken against its global competitor, Binance, at the same time. However, last week, both Coinbase and the SEC agreed to temporarily pause the legal proceedings in the case against Binance.

According to the SEC’s allegations, Coinbase had unlawfully earned billions by functioning as an exchange, broker, and clearing agency without registering these activities with the SEC, as required by law. Coinbase, however, maintained that it had not violated any legal requirements, and the SEC’s case represented an overreach by regulators who were attempting to impose new laws on the cryptocurrency space.

The exchange revealed that it expected the SEC to approve the dismissal of the case next week. The SEC has also assured Coinbase that no fines or fees will be levied against the company as part of this resolution. The regulatory body did not respond to requests for comment.

A key factor in this resolution is the role of Paul Atkins, Trump’s nominee for SEC Chair, who is expected to take a far less stringent approach to regulating cryptocurrency compared to his predecessor, Gary Gensler, under the Biden administration. Although former President Donald Trump had previously dismissed cryptocurrencies as a scam, he reversed his stance during his campaign, ultimately promising to foster a more crypto-friendly regulatory environment. Early into his term, Trump signed an executive action aimed at easing restrictions on digital currencies.

Coinbase’s CEO, Brian Armstrong, took to social media to praise the SEC’s decision to drop the lawsuit, emphasizing that the company’s fight was about protecting the broader cryptocurrency industry in the U.S. rather than just its own interests. Armstrong argued that if Coinbase had surrendered to the SEC’s demands, it could have significantly stunted the growth of the industry in America, potentially forcing many crypto firms to relocate overseas, further driving innovation into the shadows.

Armstrong reiterated that the SEC had overstepped its boundaries by attempting to regulate crypto without clear legislative support. "Regulators must enforce existing laws, not create new rules out of thin air when they don’t like the current ones," he said, acknowledging the Trump administration for their support in this matter.

In a separate but related event, Bybit, one of the world’s largest cryptocurrency exchanges, reported a significant security breach when an attacker gained access to an Ethereum wallet and transferred a staggering $1.4 billion worth of cryptocurrency to an unknown address. This breach is considered one of the largest hacks in the history of the crypto industry. However, Bybit assured its customers that other wallets, including their hot and warm wallets, remained secure, and that withdrawals were operating normally. Bybit’s CEO, Ben Zhou, stated that the company’s solvency would remain intact even if the hack’s losses were not recovered, and that all clients’ assets were fully backed 1:1.

Between 2021 and 2024, the average amount stolen in crypto-related hacks amounted to $2.75 billion annually, according to blockchain analysis firm Chainalysis. Despite this, both Coinbase and Bybit continue to assert their commitment to safeguarding user assets and maintaining a stable presence in the crypto market.

In summary, the dropping of the lawsuit against Coinbase marks a pivotal moment for the crypto industry in the U.S., signaling a shift toward a more favorable regulatory environment under the Trump administration’s leadership. The decision to ease crypto regulations offers hope for greater stability and growth in the sector, potentially paving the way for the U.S. to remain a global hub for digital currency innovation.