Crypto Market Rocked: Binance & Coinbase Face SEC Lawsuits, $600M Negative Net Outflows

Stormy crypto market scene, dark ominous clouds, Binance and Coinbase buildings, shadowy SEC figure looms above with lawsuit papers, negative red arrows flowing out of exchanges, contrasting light and darkness, turmoil, artistic painterly strokes, mood of uncertainty and tension.

In a highly significant development for the crypto market, two leading players, Binance and Coinbase, face the consequences of recent lawsuits filed by the Securities and Exchange Commission (SEC). The legal action has reverberated throughout the industry, resulting in considerable negative net outflows for both exchanges. Blockchain data from Nansen indicates that Binance and Coinbase collectively experienced nearly $600 million in negative net outflows within the first 24 hours of the lawsuit announcement.

Binance’s US arm saw a net outflow of roughly $123 million across multiple chains, excluding Bitcoin, with assets like MATIC accounting for around $41.6 million. Binance Global experienced a net outflow of about $368 million, while Coinbase faced a net outflow of approximately $105 million. As news of the lawsuit spread on Tuesday, Binance customers rapidly withdrew nearly $3 billion in assets and deposited only $1.57 billion, resulting in a sizable negative net outflow of $1.43 billion. Similarly, California-based Coinbase had users withdrawing around $2.64 billion, depositing just $1.46 billion, which led to a negative net outflow of $1.18 billion.

This crypto market frenzy can be traced back to the aftermath of FTX’s collapse in November 2022, when assets were redistributed across various exchanges, with Binance emerging as the primary recipient of these inflows. However, the recent SEC charges against Binance seem to have partially reversed those gains. The lawsuit alleges that Binance engaged in unregistered offers and sales of securities, with its former Chief Legal Officer accused of willfully violating US regulations. Additionally, Binance’s CEO, Changpeng Zhao, faces allegations of improperly mixing investor funds with the company’s funds.

On the other hand, the US watchdog accuses Coinbase of operating as an unregistered broker, exchange, and clearing agency, raising concerns about potential violations of financial regulations. Notably, Coinbase’s CEO, Brian Armstrong, has not been charged in connection with the lawsuit.

The SEC’s actions against Binance and Coinbase spark questions about the future of crypto exchanges and the broader market. While some argue that tighter regulations are essential for ensuring transparency and safeguarding investors, others claim that heavy-handed regulatory interference may stifle innovation and drive talent out of the United States. The outcomes of these lawsuits remain uncertain, but they undoubtedly signal a crossroads moment for the global crypto industry. As more and more people flock to digital assets, the debate about how to best regulate this rapidly expanding space becomes increasingly critical.

Source: Coingape

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