Quotes: “People should double up on compliance,” “The sheriff is in town and making their presence known,” “The coins do not represent an investment contract of any sort and as such are not securities,” “These charges have the potential to reshape the regulatory landscape for digital assets,” “We now join a number of other crypto projects facing similarly misguided actions from the SEC,” “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness,” “The SEC is attempting to chill the market for them without having proved its case in court,” “The Binance allegations are probably unhelpful to House Republicans’ renewed effort to push ahead with crypto legislation.”
This week, the U.S. Securities and Exchange Commission (SEC) took two major enforcement actions against two of the most prominent digital assets platforms, Binance and Coinbase (COIN). The SEC’s legal argument against the crypto business model’s clash with longstanding securities laws is now established, setting up the future court fights that could decide everything. The SEC accused both Binance and Coinbase of operating unregistered exchanges, and offering the sale of unregistered securities, including Binance’s own digital assets: BNB and the Binance USD (BUSD) stablecoin. Terrence Yang, a former Wall Street lawyer and managing director at Swan Bitcoin, said, “The sheriff is in town and making their presence known. People should double up on compliance.” Gustavo Schwenkler, who teaches at Santa Clara University business school and serves on the board of a crypto exchange, said, “The question about what is a security or not is kind of settled for the agency,” which could limit what any of the rest of the exchanges can do without SEC trouble. Joshua Ashley Klayman, the U.S. head of digital assets at Linklaters LLP, said, “It provides a comprehensive map for how the SEC views the crypto landscape and how it views the various moving parts.” The SEC’s legal position makes it “much harder to operate” a U.S. crypto platform, Schwenkler said. Binance responded to the charges, saying, “The coins do not represent an investment contract of any sort and as such are not securities.” Coinbase’s chief legal officer and general counsel, Paul Grewal, said, “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness.” Crypto lawyer Collins Belton tweeted, “The SEC is alleging that Binance, like Trex, Beaxy, Coinbase, and every other crypto trading platform is essentially operating an unregistered exchange.” SEC Chair Gary Gensler said, “We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions.” The SEC has not yet gone after the issuers of the tokens, apart from the platforms such as Binance and FTX that put out their own. The crypto sector has turned virtually all of its hopes toward the U.S. Congress to finally force new crypto-specific regulations. Kristin Smith, CEO of the Blockchain Association, a crypto advocacy organization in Washington, said, “The draft bill revealed in the House is a step forward to not only craft effective regulation for digital assets, but also rein in Chair Gensler’s relentless crusade.” However, the scandal-tinged SEC action against Binance, and the long-awaited suit against Coinbase may not help convince House Democrats and the Senate to rally to the crypto cause.