Here’s what happened with Binance: On Monday last week, the U.S. Securities and Exchange Commission sued Binance, its founder Changpeng Zhao, and the operating company behind Binance.US. There were 13 different charges, which you can see summarized here, and in more detail here. Binance’s response is here.
The SEC then filed a motion asking a court to freeze Binance.US’s assets. Binance.US called this step “unwarranted” and said it had already addressed the SEC’s concerns about customer assets. Binance.US said user assets would stay safe, and deposits and withdrawals were continuing as normal.
A few days later, Binance.US said it would stop allowing dollar deposits and withdrawals, giving customers until Tuesday this week to withdraw their dollar funds. It said this was part of a plan to change to being a “crypto-only exchange”. One analyst said this amounted to an “existential threat” to Binance.US.
Two Democratic U.S. senators – Elizabeth Warren and Chris Van Hollen – said that the Justice Department should investigate whether Binance made false statements to Congress this year. Meanwhile, Nigeria’s markets regulator ordered Binance to stop its operations in the country, saying the local unit that courted Nigerian investors was illegal.
Binance’s token, BNB, fell around 23% last week according to Refinitiv data.
As for Coinbase, the SEC sued the cryptocurrency platform on Tuesday last week (read about that here), and Coinbase CEO Brian Armstrong was quick to draw a distinction between Coinbase and Binance. He told CNBC that the two cases “could not be more different” and that he was confident the SEC would not try to freeze Coinbase’s assets.
Coinbase shares fell and Moody’s changed its outlook to “negative”, from “stable”.
Both Coinbase and Binance deny the SEC’s allegations and say they will defend themselves in court.
The SEC has strongly rebutted criticism that it is trying to crush the crypto industry, saying that many companies made a “calculated economic decision” to flout its rules.
“When crypto asset market participants go on Twitter or TV and say they lacked ‘fair notice’ that their conduct could be illegal, don’t believe it,” SEC chair Gary Gensler said.
What does this mean for the rest of the crypto world? The lawsuits have expanded the number of cryptocurrencies that have been explicitly labelled as securities by the SEC, which raises questions about other exchanges that have allowed U.S. investors to trade those tokens, such as Kraken, Gemini, Crypto.com and Okcoin. Check out the Reuters analysis here and explanation of what makes a crypto asset a security here.
