And now the SEC has taken one of their biggest shots yet, suing dominant crypto exchanges Binance and Coinbase on back-to-back days.
But, although the suits were similar, the situations are completely different.
Binance The SEC has been onto Binance for months now, and this suit is the culmination of those efforts. In short, it doesn’t look good for Binance:
Binance, BinanceUS, and Binance CEO Changpeng “CZ” Zhao are being charged for offering unregistered securities in the form of Binance’s BNB token and BUSD stablecoin
The SEC also alleges that Binance was commingling user funds, that CZ was secretly controlling BinanceUS, and that Binance allowed US citizens to illegally trade on the platform
These claims are so serious that the SEC is now requesting to freeze assets held by BinanceUS and defendants, including CZ – a move that we have never seen before. In other words, they strongly believe Binance has been accessing and using user funds, and are now concerned that they could do so again
Furthermore, the SEC alleges that BiÂnance and Zhao misÂused cusÂtomers’ funds by diÂverted them to a tradÂing firm called Sigma Chain, which enÂgaged in “maÂnipÂuÂlaÂtive tradÂing” that made BiÂnance’s volÂume apÂpear larger than it acÂtuÂally was
Binance’s staking service is being charged for violating securities law
Binance and its operating company are also in trouble for failing to register with the SEC
And lastly, in normal SEC fashion, they are using this opportunity to regulate by enforcement, this time alleging that the tokens for Solana, Cosmos, and Polygon are securities
We are definitely not fans of how the SEC goes about their business, but it looks like they might have a case with this one. Especially when, according to internal chat logs, Binance’s former Chief Compliance Officer admits, “We are operating as a fking unlicensed securities exchange in the USA bro”.
Adam Cochran (adamscochran.eth) @adamscochran
1/15
Evidence from SEC case against Binance including internal chat logs, first between Sam Lin (former compliance lead at Binance) and Alivn (previously head of BD)
First is their convo about equity bonuses where Sam talks about risks of holding BNB https://t.co/96IfwJEUOT
Jun 7, 2023
793 Likes 202 Retweets 126 Replies
Binance is going to fight back… but between this suit and the CFTC one, their future in the USA looks bleak. Needless to say, and as if we haven’t said it enough, if you have digital assets on BinanceUS, now is probably a good time to get out.
Coinbase As many readers know by now, the SEC has also been bullying Coinbase for months now, and to no surprise, are also charging the exchange. Here’s the gist of what Coinbase is getting slapped with:
Operating as an unregistered broker, exchange, and clearing agency
Federal security law violations from Coinbase’s Prime, Wallet, and staking products
Providing trading services for multiple illegal securities
The suit is absolutely ridiculous on multiple levels:
Coinbase has tried to come in and register with the SEC multiple times. The SEC never lets them
The SEC reviewed Coinbase’s business in 2021 before allowing it to go public (What changed between then and now?)
And to top it off, we can’t forget that the federal government actually still uses Coinbase to sell its seized crypto. So, according to the SEC, the federal government is technically using an illegal exchange. You really can’t make this stuff up.
Like Binance, Coinbase is prepared to fight. But, unlike Binance, we believe Coinbase has a strong chance to win.
Our Thoughts It's important to recognize that the crypto community was swift in assigning blame to the SEC in both instances.
We understand why.
From the inception of crypto in the US, the SEC has consistently been perceived as unfair towards crypto pioneers. The progress made on any regulatory framework has been pitiful at best. Moreover, the SEC has been notably unsuccessful in detecting FTX's fraudulent activities and safeguarding investors from entities like Greyscale, Voyager, Genesis, BlockFi, and so forth. These oversights have resulted in billions of dollars lost and have adversely impacted millions of Americans.
In light of the Binance allegations, however, one could make that argument that the SEC has finally done something right. CoinSnacks has openly shared our concerns about Binance. If the reports of commingled and misused user funds are indeed accurate, can we really fault the SEC for finally striking down hard on the exchange or attempting to implement a freeze order? Is this an overstep of their authority, or is the SEC genuinely attempting to protect US investors?
We can't say for certain. However, what remains clear, irrespective of the outcomes of these cases, is that the US needs visionary leaders, not inept regulators who seemingly go out of their way to work against, rather than with, crypto companies.
So far, the SEC's actions – especially when it comes to companies like Coinbase – have done nothing to dispel these concerns.
Coming To A Head Government lawsuits against major crypto companies are never fun, and it’s especially not fun for Coinbase shareholders (down 13% since the announcement), but it’s not all doom and gloom…
The Coinbase suit especially will provide a sense of finality to the regulatory question. If they win, Gensler (who has only 17 months left on his term) loses a lot of steam. If they lose, regulated crypto in the US is most likely cooked for the foreseeable future.
So, there’s a lot on the line here, but it’s our best versus their best. You can’t ask for much more than that.
SPONSORED
Sip on Long-Term Financial Stability with Vinovest
Investing in wine and whiskey can be a lucrative way to diversify your portfolio, and Vinovest is here to help. With wine having a return of 13.1% in 2022 and whiskey values growing over 560% in the last decade, it's clear that Vinovest knows how to manage wine and whiskey investments. With over $100 million in assets managed on behalf of clients from 44 different countries, they have the expertise and experience to make the most out of your wine investment.
With Vinovest, wine and whiskey investing is accessible and easy for everyone, whether you're a seasoned investor or just getting started. Their platform allows you to browse and select from a curated selection of wines and whiskies, and their team of experts will handle all the logistics, from storage to insurance. Plus, with real-time portfolio tracking and performance analytics, you can stay informed and in control of your investments.
Investing in wine and whiskey has never been easier, and with Vinovest, you can do it with confidence. Sign up today and start your journey toward building a profitable and diversified investment portfolio.
Valued at $196 billion, the cryptocurrency derivative market outpaces all others in the sector. Derivatives, which offer investors the ability to leverage their positions for potentially larger gains, also provides advanced risk management strategies that appeal to sophisticated institutional traders.
However, regulations make crypto derivatives trading very hard to do in the US. There really isn’t any place to go if you’re a US citizen who wants to trade crypto derivatives.
But perhaps that is beginning to change with the additions of the Coinbase Derivatives Exchange and Cboe.
Coinbase Derivatives Exchange Coinbase Derivatives Exchange is the derivatives arm of Coinbase, but up to now, all they’ve been able to offer customers are Bitcoin micro-futures, which are Bitcoin derivatives contracts sized at 1/100th of a Bitcoin. It’s a start, but it’s not what investors really want.
Cboe Digital Cboe Global Markets is probably not a company you’ve heard of before, but it might be one you hear a lot about in the future. That’s because their crypto exchange Cboe Digital has just gained approval from the CFTC to offer margined futures contracts for Bitcoin and Ether.
And, unlike Coinbase, you don’t need to be an institution to participate.
Combine this move with the fact that Cboe Digital also offers spot trading, and there very well could be another exchange contender emerging before our eyes.
Why Should I Care? There's a high likelihood that many of you may never venture into trading crypto derivatives, and that's understandable. While derivatives can pave the way for significant gains, they can also lead to substantial losses.
For most, it's advisable to tread cautiously and keep a safe distance.
However, even if you choose to stay clear of derivatives, their introduction in the US has broader implications that are beneficial to all. Derivatives attract institutional investors, who bring substantial capital. This influx of capital can help bolster prices while improving liquidity, making trading smoother and more efficient. This influx of liquidity is particularly needed in the crypto space after trading firms like Jane Street and Jump scaled back their crypto operations.
Overall, this news serves as some positive momentum for the crypto sector, which had swiftly receded from the spotlight amidst the SEC's regulatory actions.
SPONSORED
Biden's Latest Bailout: Terrible for America?
A former White House director (David Stockman) says Biden's latest bailout is a tax on all Americans with money in the bank. And a consultant for the U.S. Department of Defense says this is all leading to an event in the next 20 months that could help some get vastly wealthier… but also make it harder than ever to hang on.
This might be the most important development affecting you and your savings over the next few years.
As readers of CoinSnacks likely already know, crypto regulation in the US is currently non-existent. Nobody knows what stablecoins are legal, whether cryptocurrencies are securities or commodities, or the process of becoming a licensed exchange.
Unfortunately, there is no easy fix for regulation, as most bills aren’t very good and don’t gain much traction.
But that doesn’t mean some members of Congress aren’t still trying. And the newest proposed bill from House Financial Services Chair Patrick McHenry (R-NC) and House Agricultural Chair Glenn Thompson (R-PA) is perhaps the most promising offering yet.
Market Structure Clarity The bill primarily focuses on how crypto fits into existing US financial law. In other words, it seeks to answer the question of whether crypto is a commodity, and thus under the purview of the CFTC, or a security, and thus under the thumb of Gary Gensler at the SEC.
But, even then, it’s not totally black and white.
Each token will be treated as a separate entity, and any regulated crypto firm dealing with the token can make a case that it is a commodity by proving that it is sufficiently decentralized, meaning:
No one person had control for a year prior
No single entity owns more than 20% of the token supply
No marketing or issuance for the project was done in the last three months
Token issuances in the last twelve months have to be to end users (you and me, not insiders)
This would obviously be a huge step forward from the current system of SEC Chair Gensler unilaterally choosing which cryptos classify as securities.
Alternative Trading Systems In addition to answering crypto’s market structure question, the bill also creates a new crypto institution: the Alternative Trading System (ATS).
An ATS would simply be an SEC-registered crypto-exchange, and these platforms would have the ability to handle trading in commodities and stablecoins.
Considering that registering with the SEC is currently an impossible task (just ask Coinbase), this would be a welcome sight for any law-abiding crypto trading platform.
Not A Done Deal The bill is off to a strong start, but it’s still a ways off from the finish line:
Democrats had no part in drafting it
Every other crypto bill that has come before it has died a slow death
So, until proven otherwise, we have to assume that this bill will also meet its demise somewhere in the legislative process. But we’re definitely hoping it makes it through.
TWEET OF THE WEEK
Chris Burniske @cburniske
Bottoms often occur when bad news doesn’t move the markets lower.
Jun 6, 2023
2.13K Likes 272 Retweets 97 Replies
Redefining Passive Income
Nervous about market volatility? We've found a solution that thrives no matter which way the market sways: high-yielding dividends.
Ditch the risk and find comfort in the steady, reliable income these dividends provide. We've put together a list of our Top 5 Dividend Stocks Paying 10%+ Yields.
Launched in December 2017, CoinSnacks is home to the longest continuously running crypto newsletter. Each week, we publish our cryptoasset musings to an audience of ~60,000 crypto enthusiasts and investors.
In a space flooded with new projects, research, and narratives, the average investor may feel overwhelmed or confused. CoinSnacks offers a solution by doing the digging for you, so you don't have to spend hundreds of hours sifting through the noise.
REACH OUR AUDIENCE
If you’re a brand interested in partnering with CoinSnacks to find your next customers, parter, or ally, we’d love to hear from you. Learn more here
