The US regulator is going on the offensive in the digital asset market. Coinbase’s turn to be sued by the financial market policeman, led by Gary Gensler. The Securities and Exchange Commission (SEC) regrets that the Nasdaq-listed cryptocurrency exchange platform never registered with it to offer its services, “thus evading the disclosure regime that Congress established for our securities markets (or “securities”, editor’s note)”, is it written in the complainttaken over by The echoes. Monday, June 5, it was Binance, the largest cryptocurrency exchange platform in the world, which was taken to court, as well as its boss, Changpeng Zhao, for circumventing the regulations.
The SEC has accused Binance and Coinbase, two of the biggest companies in the industry, of violating US securities laws, offering unregistered securities and operating as unregistered platforms, among other things… The duo accounts for half of the global digital asset trade. According to the document filed in federal court in Washington, Binance notably let US residents use its platform despite the company not being registered with US authorities.
This assault on Binance comes after the one launched by the American financial products regulatory authority, the CFTC, which had assigned it at the end of March for similar reasons. The news caused Bitcoin, the most important cryptocurrency by value in circulation (more than 500 billion dollars in capitalization), to drop by almost 2% in a few minutes. As for the Binance Coin (BNB), cryptocurrency attached to the Binance platform and fourth digital currency by global valuation, it lost more than 5% of its value in less than an hour.
“We will vigorously contest any accusation”
In a reaction posted on its site, Binance revealed that discussions had been held with the SEC with a view to an amicable agreement, but that the regulator had “abandoned this process and decided to take legal action unilaterally”. “The SEC decisions undermine the role of the United States as an international platform for financial innovation and leadership” in financial products, said the group, which has no identified headquarters in the world.
The regulator also claims that contrary to what Binance has publicly argued, the American subsidiary, as well as the funds deposited there by customers, were controlled by the parent company. It reports transfers from US subsidiaries to a company controlled by Changpeng Zhao, to an account that was later used to purchase a yacht.
Binance did not respond to the issue of circumvention of the legislation, but assured that customer funds were not exposed to platform-specific risks. “We will vigorously contest any accusation” on this point, promised the company. The founder and boss of Binance, Changpeng Zhao for his part reacted: “if you have to argue with everyone, it may be you who are at fault”.
Regulate the market
The US securities regulator is thus trying to put a stop to the digital asset market. At a interview with the American television network CNBC, on Tuesday June 6, Gary Gensler declared that the United States does not need an additional digital currency, because the American dollar already fulfills this function.
After his appointment two years ago, Gary Gensler frequently urged platforms to register with the agency and pointed out that most digital tokens were considered securities, the British business daily recalls. Financial Times, Tuesday, June 6. In recent months, the tone has hardened after the failure, last November, of an agreement to take over the activities of the FTX crypto-asset exchange platform by its rival Binance.
However, criticisms have emerged over the SEC’s approach, accusing the agency “of failing to define the rules of its long-term policy for the crypto industry and instead regulating the market through measures.” of execution”, explains the Financial Times. “I think the clarity has been there for years,” Gary Gensler retorted on CNBC, adding that investors are protected by securities laws and “crypto should be no different.”
In the absence of a vote on a regulatory framework in Congress, the SEC claims control over the regulation of cryptocurrencies, a status that the CFTC contests. The procedure started on Monday, June 5, should address the question of whether cryptocurrencies are indeed financial securities and whether the SEC has authority over them, which many dispute in the middle and beyond. “Judging by these developments, it seems the SEC’s goal was never to protect investors,” Binance said, “but to make headlines.” “It’s an attack on the whole industry,” Changpeng Zhao said.