Crypto billionaires have faced significant losses this week following the Securities and Exchange Commission’s (SEC) crackdown on Binance and Coinbase. Binance CEO Changpeng Zhao’s net worth has decreased by $1.4 billion to $26 billion, while Coinbase CEO Brian Armstrong’s net worth has fallen by $361 million to $2.2 billion.
Their combined net worth had previously surged by $15.4 billion in 2023 after the revival in the prices of cryptocurrencies like Bitcoin. Before this week’s decline, Zhao’s fortune had risen by 117%, while Armstrong’s had jumped by 61%. In comparison, other billionaires on Bloomberg’s wealth index had seen a combined increase of only 9%.
Bitcoin’s resurgence was primarily supported by expectations that decreasing inflation and the US banking crisis in March would lead the Federal Reserve to halt rate increases. Lower interest rates often stimulate economic growth and lead investors to seek higher returns from riskier assets such as cryptocurrencies and stocks.
However, these factors may be overshadowed if US regulators make it challenging for the crypto industry to operate or render it difficult for Americans to trade. The SEC has filed charges against both Binance and Coinbase in the past two days. The commission filed 13 charges against Binance and its US affiliates, ranging from allegedly operating as an unregistered exchange to offering unregistered securities. Likewise, Coinbase faces similar charges based on inadequate registrations.
The lawsuit against Coinbase followed a “Wells notice” issued by the SEC in March, threatening the crypto exchange with legal actions regarding certain listed digital assets, Coinbase Earn, Coinbase Prime, and Coinbase Wallet. In response, Senator Cynthia Lummis criticized the SEC for failing to provide a clear path for crypto exchanges to register and for not offering legal guidance on defining a security.
Senator Lummis argued that the SEC’s reliance on regulation by enforcement harms consumers, suggesting that the agency should instead establish a “robust legal framework that exchanges can comply with.”
Moreover, SEC Chair Gary Gensler emphasized the need for compliance with securities laws in an interview with CNBC Squawk Box. He stated, “I think the crypto industry more broadly, if it’s going to have any success going forward, has to come into compliance with basic public policies about disclosure, about avoiding conflicts, about properly segregating customer funds, and guarding against fraud manipulation.”
These events highlight the precarious balance between fostering innovation in the crypto space and ensuring regulatory compliance to protect consumers. While regulations help safeguard investors, excessive enforcement may stifle the industry’s growth and innovation potential. Achieving this delicate balance is crucial for the future of crypto.