{"id":2771,"date":"2023-06-29T08:54:26","date_gmt":"2023-06-29T08:54:26","guid":{"rendered":"https:\/\/mysourcefunding.com\/startups\/coinbase-and-binance-lawsuits-put-crypto-on-ice\/"},"modified":"2023-06-29T08:54:26","modified_gmt":"2023-06-29T08:54:26","slug":"coinbase-and-binance-lawsuits-put-crypto-on-ice","status":"publish","type":"post","link":"https:\/\/mysourcefunding.com\/?p=2771","title":{"rendered":"Coinbase and Binance Lawsuits Put Crypto on Ice"},"content":{"rendered":"
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This tension\u2014over the interpretation of existing securities laws and whether they apply to crypto\u2014will form the center of the case to come,\u00a0says Noelle Acheson, an independent crypto analyst.\u00a0\u201cIt\u2019s very much game on,\u201d Acheson says.<\/p>\n

With the filings against Coinbase and Binance, the SEC has now formally alleged that\u00a0seven of the top 15<\/a> largest cryptocurrencies are securities. Bitcoin is\u00a0considered an exception, and the SEC has not rendered a clear verdict on Ether, but the agency \u201cseems to be using a broad rubric by which to classify these tokens as securities,\u201d says Molly White, author of crypto-skeptic blog\u00a0Web3 Is Going Just Great<\/em>.\u00a0<\/p>\n

Any exchange that supports the trading of securities must first register with the SEC\u2014a process that comes with various reporting and diligence requirements. SEC chair Gary Gensler has long called on crypto exchanges to register or face enforcement action.<\/p>\n

But the demand creates a catch-22 of sorts that threatens viability in the US of crypto assets that are deemed securities: Gensler demands that crypto exchanges register with the SEC, but the exchanges claim there is no means of doing so. In March, Paul Grewal told WIRED that \u201cCoinbase is not asking for special treatment\u201d but that there is no clear path to registering because the process makes no accommodation for the unique attributes of crypto tokens. Coinbase CEO Brian Armstrong reiterated the same message in a\u00a0tweet<\/a> responding to today\u2019s SEC complaint.<\/p>\n

Coinbase\u2019s share price fell nearly 14 percent after the case was announced. Dan Dolev, senior fintech equity research analyst at Mizuho, estimates that about 30 percent of Coinbase\u2019s revenue could be at risk as the crypto industry comes under tighter scrutiny. Some of that loss could fall off with alt coin trading, if those now have to be registered as securities, and the exchange could lose another chunk from a loss in staking revenue. More risk-averse institutional investors might start to steer clear of the exchange, while banks may be reluctant to work with an organization that is attracting regulatory attention. After a chaotic year in the crypto industry, this is just another blow for Coinbase. \u201cThis downward spiral is only getting worse,\u201d Dolev says.<\/p>\n

The complaints against Coinbase and Binance are likely to take years to pass through the courts\u2014as demonstrated by the SEC\u2019s\u00a0case against Ripple, which deals in many of the same issues. Short of legislative intervention from Congress, questions around the classification of crypto assets and jurisdiction of the SEC will remain unresolved too. All the while, the US crypto industry will hang in limbo.<\/p>\n

Some in the industry think that\u2019s part of the motivation.\u00a0 \u201cIt\u2019s an effort to chill the market,\u201d says Justin Browder, partner at law firm Willkie Farr & Gallagher. The complaints will serve to put crypto on ice in the US, he explains. For now, exchanges will continue to operate and customers are still able to trade, but a question mark will hang over the legality of the crypto assets named in the complaints for the duration of the legal proceedings. Equally, new crypto businesses are less likely to want to set up shop in a country that has demonstrated itself unsympathetic to the sector.<\/p>\n

Browder says the charges brought by the SEC this week indicate that the agency is perfectly comfortable with a future in which US residents have limited access to crypto assets. \u201cThe undercurrent is that the SEC views crypto assets, in the way they\u2019re currently offered, as inappropriate for retail investors,\u201d says Browder. \u201cIf the SEC thinks this asset class needs to be curtailed, these two actions are the most effective way to send the signal.\u201d<\/p>\n<\/div>\n