The United States Securities and Exchange Commission (SEC) has launched lawsuits against major cryptocurrency exchanges Binance and Coinbase, marking a significant shift in the regulatory landscape of the crypto industry. The charges against these exchanges include allegations of deceit, lack of disclosure, and serious regulatory violations, signaling a new era of stringent oversight for the crypto market.
SEC Cites Terraform Case in New Rulings
The SEC has referenced its recent ruling against Terraform Labs during the hearings for both Coinbase and Binance. On December 28, the SEC ruled that Terraform Labs’ tokens, UST and LUNA, should be deemed securities, citing violations of Sections 5(a) and 5(c) of the US Securities law. This precedent is now being used to strengthen the SEC’s claims against Coinbase and Binance, arguing that these exchanges also offered and sold unregistered securities.
Binance’s Regulatory Challenges
Binance, a leading player in the global cryptocurrency exchange market, faces multiple regulatory infringements. The SEC accuses Binance of commingling billions of dollars belonging to users and undermining regulations to allow affluent US investors to trade on its unregulated global platform. Additionally, Binance has announced plans to delist eight Binance USD (BUSD) trading pairs and may soon delist 10 prominent privacy coins, including Monero, Zcash, and Horizen, due to regulatory concerns.
Coinbase Under Scrutiny
Coinbase is also grappling with a lawsuit from the SEC, which claims that the company is operating as an unregistered broker and exchange. The SEC believes that Coinbase’s prime brokerage, exchange, and staking programs violate securities regulations. This scrutiny has raised concerns among Coinbase investors about the potential reclassification of tokens listed on the exchange as securities, which would bring new regulatory requirements.
Cryptos Named Securities by the SEC
The SEC has identified 19 cryptocurrencies traded on Binance and Coinbase as securities. These tokens meet the criteria of the Howey Test, which includes an investment of money in a common enterprise with an expectation of profit derived predominantly from the efforts of others. The full list of tokens named as securities by the SEC includes:
- Binance Coin (BNB)
- Binance USD (BUSD)
- Cardano (ADA)
- Solana (SOL)
- Polygon (MATIC)
- Filecoin (FIL)
- Algorand (ALGO)
- Axie Infinity (AXS)
- Coti (COTI)
- Decentraland (MANA)
- The Sandbox (SAND)
- Chiliz (CHZ)
- Flow (FLOW)
- Internet Computer (ICP)
- Near Protocol (NEAR)
- Voyager Token (VGX)
- Dash (DASH)
- Nexo (NEXO)
- Nervos Network (CKB)
Implications for the Crypto Industry
The lawsuits against Binance and Coinbase have sparked extensive debates about the future of cryptocurrency regulation. If these tokens are ultimately classified as securities, they would likely be delisted from US exchanges, creating substantial regulatory challenges for the crypto industry. This situation underscores the urgent need for a clear, modern, and inclusive regulatory framework to ensure that innovation is not stifled while protecting investors’ interests.
A Tipping Point for Crypto Regulation
The pending lawsuits signify a critical juncture for the crypto industry. As these cases unfold, they will likely set new precedents and shape future legislation. The broader crypto market is watching closely, anticipating far-reaching effects on its operations. The call for clear, modern, and inclusive regulatory frameworks has never been louder, as the industry evolves at a breakneck pace and the laws governing it must keep up.
