The U.S. Securities and Exchange Commission (SEC) filed two major lawsuits and applied for a temporary restraining order over two days against Binance and Coinbase, respectively the world’s and the U.S.’s largest crypto exchanges. These cases could potentially define how cryptocurrencies are regulated in the U.S., at least until Congress passes relevant legislation.
Both Binance and Coinbase have issued statements and had their respective executives weigh in on both TV and Twitter about the allegations. Coinbase CEO Brian Armstrong has made appearances, claiming that the SEC reviewed and allowed his company to go public in 2021. However, Alexandra Damsker, a former SEC attorney who now advises INX, claims that Armstrong’s statement is misleading since a reviewer with the Division of Corporation Finance does not determine whether something is legal or illegal.
Furthermore, both companies have complained about regulation by enforcement rather than guidance. The crux of this issue lies in the fundamental question: Are the cryptocurrencies listed in the Coinbase and Binance complaints securities? The SEC believes so, making Coinbase’s attempts to get a different response from the agency seem futile.
Binance, on the other hand, is taking a similar approach, arguing in public statements that it had been cooperating with the SEC’s investigation and tried to work towards a negotiated settlement. The company intends to “defend our platform vigorously” against the SEC’s allegations.
The Binance and Coinbase cases indeed have some significant differences. While Coinbase is facing a straightforward case about listing securities without registration as a broker, exchange, or clearinghouse, the Binance case includes allegations that Binance and CEO Changpeng Zhao had secret access to Binance.US’s customer funds and diverted them to Zhao’s entities.
In various tweets, Binance.US states that the SEC had not previously expressed concern about customer funds, and the company’s attorneys have already discussed these issues with the agency. Binance now has until June 12 to respond to the SEC’s motion for a temporary restraining order, with a hearing scheduled for June 13. The company’s defense is anticipated to reveal some of its broader arguments against the SEC’s overarching complaint.
These cases demonstrate an ongoing struggle between crypto exchanges and regulatory authorities, highlighting the need for clear guidance on how to navigate and comply with evolving regulations in the industry. As the legal battles unfold, crypto enthusiasts and investors will undoubtedly keep a close eye on the outcomes and their impact on the future of cryptocurrency in the U.S. and beyond.
Source: Coindesk
