In an eventful month for the cryptocurrency industry, the US Securities and Exchange Commission (SEC) has launched legal proceedings against two leading platforms, Binance and Coinbase, in quick succession.
Binance, the world’s largest cryptocurrency exchange, faces serious allegations brought by the SEC. The regulator accuses the platform of engaging in deceptive practices, conflicts of interest, lack of disclosure, and deliberate evasion of the law. Binance is further accused of mishandling client funds, lying to regulators, and diverting customer assets. Criminal charges are involved in this case. Binance’s CEO and co-founder, Changpeng Zhao, is personally charged.
On the other hand, Coinbase, one of the few public cryptocurrency exchanges, is alleged to be operating illegally as an unregistered national securities exchange, broker, and clearing agency since 2019. The SEC claims that Coinbase offers services without the necessary licenses.
Binance has responded to the SEC complaint by dismissing it as a ploy to generate publicity and stating its intention to vigorously defend its platform. It’s important to note that while Binance is not licensed in the US, it has a subsidiary, Binance.US, which serves American investors.
Coinbase, on the other hand, has welcomed the SEC complaint, viewing it as an opportunity to obtain clarity through the legal process. The platform’s CEO and co-founder, Brian Armstrong, has expressed a willingness to seek court intervention for regulatory clarification.
The legal proceedings carry significant implications for the cryptocurrency industry. They raise questions about whether cryptocurrencies are considered securities under US law and also potentially impact staking services. The SEC considers any cryptocurrency other than Bitcoin to be a security and may classify staking within the same category. Coinbase is accused of offering services without obtaining the necessary license, effectively violating securities laws.
The SEC’s desired outcomes include injunctive relief, disgorgement of ill-gotten gains, penalties, and other equitable relief in both cases.
It’s worth noting that Binance is also facing investigations by other US regulators. The Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its CEO in March, alleging unauthorized trading of crypto derivatives by US residents. The Department of Justice (DoJ) is reportedly investigating Binance for potential money laundering charges.
