SEC lawsuits against Binance and Coinbase unify the crypto industry

SEC lawsuits against Binance and Coinbase unify the crypto industry


Update (June 7, 12:05 pm UTC): This article has been updated to add comments from BitMEX CEO Stephan Lutz.

Professionals from across the cryptocurrency industry have responded to recent actions by the United States Securities and Exchange Commission (SEC) against two of the largest cryptocurrency exchanges, Binance and Coinbase.

On June 5, the SEC filed a lawsuit against Binance for allegedly offering unregistered securities. Just one day after filing the Binance lawsuit, the commission also went after Coinbase on similar grounds, claiming that popular cryptocurrencies offered by the exchange, such as Solana (SUN), polygon (MATIC) and The Sandbox (SAND), qualify as values.

Cointelegraph reached out to market players working in the space to learn their responses to recent SEC actions. From sharing the belief that it will drive crypto companies away from the US to simply calling the SEC’s actions lazy, industry players shared their thoughts on the latest developments.

An ‘unacceptable’ approach to regulation

According to Kristin Smith, CEO of the Blockchain Association, while the SEC’s actions are expected, it is still unacceptable. Smith explained that:

“The SEC doesn’t make the law. Indeed, this approach to regulation is unacceptable, but it is what we expect from the SEC and its anti-crypto stance.”

The executive noted that while the industry and the US Congress are working to develop effective regulation, the SEC “continues to distract from substantive policy efforts.” The executive believes that by listing assets in this way, the SEC is trying to circumvent formal rulemaking processes and deny public participation.

Meanwhile, Paolo Ardoino, CTO of stablecoin issuer Tether, believes companies’ complaints against the SEC should be heard. According to Ardoino, the uncertainty of rules and guidance in the US is becoming a common theme, even among the country’s biggest cryptocurrency supporters.

Turbos Finance CEO Ted Shao also echoed Smith’s sentiment. Shao says that this is “not the direction that Web3 developers want to see.” The executive believes that the SEC showed that it is against the entire Web3 space, since they are also pursuing important projects, not only centralized exchanges.

Driving crypto players abroad and weakening consumer confidence

In addition to the SEC’s actions being unacceptable, other professionals working in the space believe the effects of this recent move include pushing crypto players into more crypto-friendly jurisdictions and undermining consumer confidence in cryptocurrencies within USA.

Insider Intelligence crypto analyst Will Paige said the recent lawsuits highlight the SEC’s intent to police the space via the app in the absence of a regulatory framework. According to Paige, this could potentially topple the “already weak consumer confidence in cryptocurrencies” in the country.

Cryptocurrency ownership data from 2020 to 2023 and projection to 2024. Source: Insider Intelligence

Ben Caselin, the director of strategy at cryptocurrency exchange MaskEX, believes that while this is a case against Binance, it may have implications for other players in the United States. He former AAX executive He explained that this can “open up more opportunities for other jurisdictions, such as Hong Kong, Dubai or even El Salvador, to drive innovation and attract capital and talent.”

Oscar Franklin Tan, Legal Director of non-fungible token Enjin protocol, agrees with the sentiment. According to Tan, the world will not wait for the US to decide on cryptocurrencies. Tan explained:

“The SEC’s actions only drive talent and innovation outside of the US to countries with clearer rules that support responsible builders. Singapore, in 2020, stated that it does not follow the US Howey test. Japan has a clear self-regulatory framework for exchanges.”

The executive believes that “progressive countries” will reap the benefits, especially now that the explosions in artificial intelligence and extended reality highlight the need for blockchain and genuine digital ownership.

Related: The US Financial Services Committee sets a date to discuss the future of cryptocurrencies

Doubts about fairness and the motivations of the SEC

While some expressed their beliefs about the potential effects of the SEC lawsuit against Binance and Coinbase, other crypto professionals explored the motivation and fairness of the SEC move.

According to David Schwed, COO of blockchain security firm Halborn, the SEC’s mandate is to ensure investor protection. Schwed believes that this can be done through clear regulations, not through enforcement actions. The executive added that SEC Chairman Gary Gensler’s motivations may be skewed. “It seems to me that his personal ambitions and the need to validate his position have now outweighed his main mandate,” he explained.

Alex Strześniewski, the founder of the decentralized finance AngelBlock protocol, described the SEC’s actions as “lazy.” The executive believes that he is not promoting adequate regulation. He explained:

“It’s like a school teacher who scolds you for giving the wrong answers but doesn’t give any explanation beyond that. I also don’t think the SEC, in fact, has jurisdiction over everything they claim.”

Meanwhile, Tim Shan, COO of decentralized exchange Dexalot expressed mixed feelings about the lawsuits, saying the SEC’s actions are unfair to the community.

“They have provided very little clarity or guidance to the crypto community. They are regulating through the courts, which is quite unfair and not the right way to regulate/govern,” he said.

Impact on crypto and altcoin stock prices

Stephan Lutz, CEO of cryptocurrency trading platform BitMEX, shared information about the possible effects of the SEC crackdown on exchanges in the market. In the short term, Lutz said there would be downward pressure on crypto stock prices, altcoins, and valuations of US-based crypto startups. Lutz explained that:

“Investors are likely to hold funds in crypto but dump Bitcoin because they are unlikely to be considered a stablecoin or security due to their correlation to fiat money.”

In the medium to long term, Lutz believes that exchanges will be cautious when dealing with US-based clients and providing access to what the SEC claims are securities. The executive also expressed his frustration that regulators are “taking the issue of the definition of values ​​to the courts once again”, instead of offering clearer guidelines.

BitMEX has notably had its share of issues with regulators in the US. In 2021, the trading platform agreed to pay up to $100 million to resolve a case with the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN). In 2022, a New York court ordered the founders of BitMEX to pay $30 million in civil penalties.

Magazine: Crypto Regulation: Does SEC Chairman Gary Gensler Have the Final Say?