The US Securities and Exchange Commission has sued the two crypto exchanges Coinbase and Binance.
Both platforms have therefore offered crypto assets for trading, which the SEC classifies as securities.
Experts say the lawsuit poses an existential threat to the two platforms.
It’s a week of upheaval for the cryptocurrency industrybut not in the way the market has been accustomed to over the past decade as it has witnessed unbridled growth and bold claims to create the future of money.
Die Securities and Exchange Commission (SEC) hat am Montag their lawsuit against Binance and the CEO Changpeng Zhao published. One followed on Tuesday Lawsuit against Coinbasethe largest cryptocurrency exchange in the USA and a public company.
As early as March there were rumors that a broader crackdown was underwayas the SEC and Commodities Futures Trading Commission cracked down on a handful of market participants, including Binance’s Zhao — but those were just cross-shoots compared to this week’s actions.
An “existential” matter
In both cases, the SEC claims that the The stock exchange work illegally, their users unregistered Shares offer and have not properly registered as a broker. The lawsuit against Binance goes a step further, alleging that customer funds were misused and that funds flowed to subsidiaries controlled by Changpeng Zhao to conduct wash trades designed to artificially inflate Binance’s trading volume.
While experts largely agree that the Binance case is more serious, they also see the lawsuits as a real threat to both companies’ operations in the US. While Binance could potentially withdraw from operations in the US – the company is incorporated in the Cayman Islands but has no official incorporated headquarters – this would not be justifiable for Coinbase, which has US revenue of $687 million (around $629 million). Euro) totaling 773 million US dollars (about 713 million Euro) that the company earned in the first quarter of this year.
“If this goes badly, it could become an existential problem for Coinbase,” Jeff Blockinger, an attorney for decentralized finance platform Vertex Protocol, told Business Insider. He added that it wouldn’t be a matter of simply relocating, since the bulk of its revenue and customers are in the US and therefore within the purview of the SEC.
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For his part, Coinbase CEO Brian Armstrong says he is “proud to represent the industry in court to finally get clarity on crypto rules,” and pointed this out in a Twitter postthat it was the SEC that audited his business and allowed him to go public.
Sources told Business Insider that they expect Coinbase to fight extremely hard against the lawsuit, which essentially says their entire US operation is illegal. As for Binance, Gensler himself this week drew the line between the exchange and FTX, saying there are similarities in both cases.
“There are parallels to the FTX scam manipulations that we have seen and what Sam Bankman-Fried is being accused of,” Gensler said in an interview with Bloomberg TV on Tuesday.
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In a stark warning to the industry, Gensler advised Binance investors to beware of keeping their money on the platform amid such a web of deception.
“This is a broad attack, specifically related to Binance, but it is a broader attack on the industry. That’s the SEC stepping in and saying they’re the sheriff and exercising their authority,” Richard Smith, chairman and chief executive officer of the nonprofit business organization Foundation for the Study of Cycles, told Business Insider. “I think this is existential for Binance in the US,” warns Smith.
What does the future of cryptocurrencies look like?
From Smith’s point of view, the real existential question isn’t the SEC’s lawsuit, but the nature of the market itself.
“I have to say I’m disappointed in crypto at this point,” he said. “The existential question isn’t the SEC, it’s whether there is any real value in these assets beyond gambling or running an exchange.”
Experts also strongly believe that the fall of the SEC could result in a large percentage of the so-called altcoin market disappearing, or at least exiting the US if most crypto tokens are found to be securities.
“That probably wouldn’t be a bad thing,” Smith said, “I haven’t seen the token aspect really create value.”
“If the SEC and Coinbase agree on some sort of deal, that just means the casino can stay open.”
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