Explainer: Here's why SEC is going after Coinbase, Binance
1 min read 12 Jun 2023, 07:58 AM ISTUS SEC sues Binance and Coinbase for allegedly violating securities laws. Both deny allegations and vow to defend themselves. SEC seeks asset freeze for Binance US.
PremiumThe US Securities and Exchange Commission (SEC) is cracking down on cryptocurrency behemoths Binance and Coinbase. Last week, the US SEC filed a lawsuit against the world's biggest cryptocurrency exchanges. Binance and Coinbase are both alleged to have violated the law by operating as securities exchanges without registering their businesses with the SEC. Binance has also faced charges of diverting customer funds to a separate business, among other accusations. The SEC has asked a federal judge to freeze the assets of Binance’s US platform.
Both Coinbase and Binance deny the SEC's allegations and have pledged to vigorously defend themselves in court.
The SEC alleged Coinbase traded at least 13 crypto assets that are securities, while it accused Binance of offering 12 cryptocurrency coins without registering them.
Why SEC is after Coinbase and Binance?
Since Gary Gensler became the chairperson of Wall Street's regulating body two years ago, his message to cryptocurrency firms has been consistent. “We don’t need more digital currency … we already have digital currency — it’s called the U.S. dollar." SEC chief Gensler said he would do all it takes to tame a world he likens to "the Wild West."
Gensler believes that most cryptocurrencies are securities, therefore, the current law gives his agency the power to regulate them. Notably, Coinbase and Binance are both being accused of failing to register their exchanges with the SEC. However, crypto firms are saying that by design, they are supposed to operate outside of the traditional financial system. Binance has suspended USD deposits while notifying customers that their banking partners are preparing to pause fiat (USD) withdrawal channels as early as June 13.
Coinbase and Binance join a list of crypto companies against which the SEC has taken action, including Kraken, Genesis, and Gemini. Cryptocurrencies are witnessing a rough ride since last year, with the collapse of FTX.
Its now-former CEO Sam Bankman-Fried faces civil charges from the SEC and the CFTC.
Among all cryptocurrencies, Bitcoin surged in popularity, although they are still nowhere near as widely held as stocks.
A recent research report estimated that 12% of the population owns crypto investments in the US. Hence more regulation and transparency might pave the way for more investment in the crypto.
