Top Lawyer Explains Why Coinbase Will Not Delist ETH As XRP

Attorney Morgan says Coinbase will not delist BTC and ETH because both assets account for 65% of its trading volume.

In a tweet yesterday, Australian-based lawyer Bill Morgan asserts that San Francisco-based cryptocurrency exchange Coinbase will “never treat” Bitcoin (BTC) and Ethereum (ETH) the same way as XRP.

Per attorney Morgan, Coinbase will not treat ETH and BTC as XRP because its business model highly depends on trading the two largest cryptocurrencies by market cap.

And I agree with you & @JohnEDeaton1 but for the reason I explained yesterday Coinbase will never and cannot treat Ethereum the same way as XRP. Coinbase’s business model is dependent on Ethereum & Bitcoin trading on its exchange. /1 https://t.co/BoEB0xMGyy

— bill morgan (@Belisarius2020) April 30, 2023

Coinbase Won’t Delist BTC and ETH

For context, Coinbase, which listed XRP in 2019, delisted the coin on January 19, 2021, barely four months after the Securities and Exchange Commission sued Ripple for violating securities laws. The exchange clarified that its decision to halt XRP trading stemmed from the SEC’s enforcement action against Ripple Labs.

Although Coinbase cited the Ripple vs. SEC lawsuit as the major reason behind its decision to discontinue XRP trading, Morgan noted that the exchange would not have delisted BTC and ETH even if there was litigation naming both assets as securities.

He believes such a move would financially wreck Coinbase, given that both crypto assets account for 65% of the exchange’s total trading volume.

So even if there was a proceeding in which the SEC named Bitcoin or Ethereum as securities @Coinbase would not and could not cease trading of these cryptos because it would be wrecked financially. XRP was more easily able to be sacrificed. It wasn’t 65% of Coinbase’s trading /6

— bill morgan (@Belisarius2020) April 30, 2023

Coinbase Has Fair Notice for BTC and ETH

Recall that, earlier this year, the securities regulator issued a Wells Notice to Coinbase. Notably, a Wells Notice is a letter the SEC sends to a company after an investigation, informing the recipient that it plans to bring an enforcement action for possible violation of securities laws.

In response to the SEC’s Wells Notice, Coinbase argues that it uses a robust process to ensure it does not support crypto assets deemed as securities. Coinbase also argued that secondary market transactions fail all four prongs of the Howey test.

Marc Fagel, a former SEC lawyer, asserted that he does not think Coinbase has a viable, fair notice defense for the regulator’s claim. However, Morgan noted that the exchange has fair notice defense for Bitcoin and Ethereum, the two major crypto assets that account for a significant amount of its trading volume.

An excerpt from a December 7, 2020 letter showed that senior SEC staff had expressed views suggesting that Bitcoin and Ethereum were not securities.

Morgan added that the exchange would rely on statements from these top SEC staff, including William Hinman, to establish a fair notice defense for the two largest crypto assets by market cap.

This is important. Coinbase will rely on such evidence to argue a FN defense for at least #Ethereum and Bitcoin. It is only since the merge last September when Ethereum moved from PoW to PoS that the SEC started indicating Ether was a security. /4

— bill morgan (@Belisarius2020) April 30, 2023

Meanwhile, Morgan’s recent assertions come days after he said Coinbase’s decision to delist XRP weakens its Wells Notice argument.

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