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Leaked chat logs and the potential downfall of Binance.US headlines Binance’s week to forget.
Binance, the world’s biggest crypto exchange by every metric imaginable, has had a rough go of it the past few weeks. The Securities and Exchange Commission (SEC) has been on a warpath of late and Binance appears to be the next target in their sights. It all started on Tuesday, when the SEC officially sued the financial institution and its CEO, crypto billionaire Changpeng Zhao (CZ).
According to the SEC, Binance was offering the sale of securities without an appropriate US licence, while allegedly being aware of it the whole time. To make matters worse, the SEC got their hands on a swathe of leaked chat logs where high-level Binance officials nonchalantly admit to operating as an unlicensed securities exchange – exactly what they’re being accused of.
But all of this is barely scratching the surface of the Binance horror show. Tuesday’s shock announcement was immediately followed by a restraining order on Wednesday, forcing the US branch of Binance to freeze its assets. As a result, the crypto exchange was forced to pause OTC trading for the foreseeable future.
Everything came to a head on Saturday, when Binance.US announced its intention to temporarily transition to a crypto-only exchange. They have paused all USD deposits and removed all USD trading pairs. Fiat withdrawals may face the same fate in the coming days as banking channels prepare to cut ties with the maligned institution. Binance’s CEO CZ isn’t faring a whole lot better, having been served a subpoena at the onset of this whole ordeal.
Binance has long had a regulatory target on its back, and the outcome of this legal battle could permanently change the landscape of crypto as we know it.
The SEC’s long-standing chairman would be ousted, if passed, amid several ongoing legal battles with major cryptocurrency platforms.
The SEC’s chair, Gary Gensler, has had a long and complicated relationship with the cryptocurrency ecosystem, to say the least. Now, his rule may be coming to an end, with United States Congressman Warren Davidson officially filing legislation to permanently restructure the SEC on Tuesday. This is not the first time Davidson has made this move, with similar amendments initially proposed in April 2023, and earlier restructuring discussions presented in January 2022. The major outcome of this latest “SEC Stabilization Act” would be the removal of Gensler, who the Congressman declared was a “tyrannical chairman”.
Davidson’s primary rationale for introducing this bill is to remedy the “ongoing abuse of power” that’s reportedly a feature of the current SEC framework. The new legislation implies that Gensler and others from the regulatory body operate within their own best interests, rather than making decisions that benefit the future of US capital markets.
The proposed changes come in the midst of legal tussles between the SEC and high-profile crypto institutions Binance and Coinbase. The SEC has turned its attention to digital assets since 2023 kicked off, causing uncertainty to swell in the industry. These actions have been harmful to blockchain innovation within the US, potentially pushing development and new business off-shore. Davidson’s legislation wishes to amend this and allow the US to become a hotspot for development within the industry.
Whether the restructuring bill is successful may play a big role in crypto’s future in the United States. One thing’s for sure – most US operating digital asset businesses will be glad to see the back of Gensler, whose hardline approach has created plenty of enemies.
Hong Kong continues to lead China’s resurgence into the crypto industry
After a dark few years for cryptocurrency in China, things may be starting to turn the corner. On 12 June , the fourth-largest bank in the world – the state-owned Bank of China – became the first Chinese institution to officially release a tokenised security in Hong Kong. The issuance was completed by the bank’s investment branch, the BOCI. Approximately $28 million (200M Chinese yuan) worth of digital notes was minted via the Ethereum blockchain. The event was ushered along with the help of investment bankers UBS, a Swiss firm that previously issued $50m in digital notes through a custom blockchain.
Hong Kong is trying to position itself as the Asia Pacific leader of digital currency, following its 1 June announcement that retail trading of crypto was opened to the public for the first time in several years.
The timing of this development is quite intriguing, given the SEC doubling down on its legal battle with Coinbase and Binance. While the United States struggles to develop an all-encompassing regulatory framework, traditionally crypto-negative nations like China (through its majority state owned Bank) are starting to make moves in the opposite direction.
Although China has a long way to go before crypto may be fully legal, let alone adopted, this marks the first step toward the nation embracing certain innovation in the sector. Given China’s position as a global economic power, its potential re-entry into the blockchain industry would likely have a huge impact.
Brian Armstrong sat down for a 30-minute interview with the Wall Street Journal defending his company from the SEC’s allegations.
Coinbase’s bitter legal battle with the SEC has escalated further, with the company’s CEO Brian Armstrong firing back in a tell-all interview with the WSJ. Armstrong was firm in pushing back against the SEC’s claims that Coinbase is operating as an unregistered securities exchange. His key argument was that the current state of securities laws imparted by the SEC is unfit for a modern fiscal system that will be driven by the evolution of digital assets.
Brian Armstrong’s lengthy interview is part of a broader legal strategy adopted by Coinbase to place the lawsuit firmly in the public eye, rather than resolving it privately in court or via settlement. The “return serve” approach has included deconstructing issues with the SEC’s current regulatory framework through a series of public statements and appearances.
Key takeaways from the Armstrong interview include:
Although the Wall Street Journal interview was polite, Coinbase didn’t pull punches in a separate video released last week.
The video claims Coinbase met with the SEC 30 times in 2022 seeking guidance, and that 1,000,000 tech jobs will be driven offshore due to the SEC’s inflexible regulations. Furthermore, the video puts forward the current legal framework used to define digital tokens was passed in 1946 and that the SEC is yet to pass a single comprehensive rule for crypto in the United States. Coinbase’s tactic hasn’t been to just defend themselves – they are on the attack. Whether this strategy proves prudent will play out over the coming months, and potentially years.