Binance.US and Coinbase lawsuits: the SEC reveals its hand

Binance.US and Coinbase lawsuits: the SEC reveals its hand

This is a major moment for the crypto industry, likely to define its development for the years to come.

The SEC’s lawsuits against Binance.US and Coinbase have revealed the agency’s hand and mobilized the community, reminding all of us of the importance of decentralization.

This week the SEC sued Binance.US (comingling funds, defrauding investors, operating as an unregistered broker), and then Coinbase (operating as an unregistered broker).

This was not unexpected: for a long time, the SEC has been claiming that cryptos are in fact securities, without giving any details.

We tend to think that this week has brought good news, as the SEC has finally shown its hand, allowing the crypto industry to better see the menace.
The crypto markets reflected the relief, dipping on the Binance news, and then surging on the Coinbase one.

Here are the main insights on the SEC position:

 Bitcoin and other PoW-based cryptocurrencies are safe

Gary Gensler has already mentioned that Bitcoin was sufficiently decentralized to not be considered a security. As the lawsuits omit other PoW-based coins, such as $DOGE or $LTC, we can say that PoW does not enter the SEC’s scope (at least for now)

✅ Ethereum is not mentioned as security

The second-biggest cryptocurrency is notoriously missing from the list of cryptos the SEC claims securities.
Is it because of Ethereum’s PoW-based beginning, or other interests at stake (pun intended 😅), is still unclear.

✅ Ripple ($XRP) is also missing

The 6-biggest crypto by market cap, $XRP is unlikely to have been forgotten. It would be logical to say that the SEC did not dare to mention it, as the outcome of its ongoing lawsuit v Ripple (debating whether $XRP is security) is still unknown.

$SOL, $ADA, $MATIC, $FIL, $SAND, $AXS, $CHZ, $FLOW, $ICP, $NEAR, $VGX, $DASH, $NEXO, $ATOM, $BNB, $COTI, $BUSD are in trouble

These cryptoassets have been explicitly mentioned in the lawsuits as “crypto asset securities”, which would imply that all the regulations concerning traditional securities would apply to them as well. Even those which are impossible to enact, like some reporting obligations.

Robinhood is already rumored to start delisting these assets.

Staking crypto is somehow likened to a “loan” within the ancient Howey test, and this service is in danger

🗣️ How did the players react?

📌 Binance’s CZ fiercely denies the accusations and reminds how remarkably inefficient the SEC was to prevent the FTX fraud.

📌 Coinbase looks well-prepared for a long legal battle ⚖️

📌 The US House Financial Committee has scheduled a full committee hearing aiming to “provide clarity for the digital asset ecosystem”. It is to be held on June 13, and the US crypto community hopes that it would mark the conception of a law that could finally end the SEC’s one-sided interpretations of the existing regulation. 💁‍♀️ Yes, the SEC does not write laws by itself…

All in all, the SEC’s actions, widely considered a regulatory overreach, are bringing into the spotlight the initial decentralization ideals and the protocols that embody them.
Bitcoin, self-custody, Nostr…

As often, the authorities might have unintentionally given decentralization a boost.