SEC sues ── Binance and Coinbase, commonalities and differences | CoinDesk JAPAN | CoinDesk Japan

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The U.S. Securities and Exchange Commission (SEC) has filed major lawsuits against the world’s and America’s largest cryptocurrency exchanges, Binance and Coinbase, for the second day in a row. While the two lawsuits have something in common, they also have some pretty big differences.

important point

The lawsuit could set the tone for crypto regulation in the United States, at least until Congress passes some legislation. The question is how Binance and Coinbase will protect themselves.

Detailed analysis

CoinDesk has already reported extensively on the Binance and Coinbase lawsuits. What interests me now is the response of both companies. Each has issued numerous statements, and executives have spoken out about the allegations on television and on social media, but there are clear differences between the two companies.

Coinbase CEO Brian Armstrong has said on television and at events that the company has no intention of shutting down its staking service, which is also under scrutiny from regulators in 10 states.

Meanwhile, Binance US announced on June 7 that it will suspend trading on more than 50 token pairs. It has repeatedly said that client funds have never been at risk and that it disagrees with the SEC’s assessment.

coinbase case

One of the things Coinbase has claimed since receiving its “Wells Notice” earlier this year is the fact that it went public with the help of the SEC.

“The SEC has reviewed our business and cleared us to become a public company in 2021,” Armstrong tweeted.

That’s a misleading claim, says former SEC attorney Alexandra Damsker.

The job of the SEC’s Corporate Finance Division is to look for material misstatements and oversights and ensure that SEC rules are being met, he said. Officials say it’s not their job to decide if something is legal or illegal. But if he sees something suspicious, he said, he can alert enforcement and other staff.

Armstrong also said the company had tried to “visit and register” with the SEC, as SEC Chairman Gensler often put it, but there was “no way out” for it.

This complaint was recently echoed in Congress by Dan Gallagher, head of compliance at Robinhood (Robinhood has also been subpoenaed by the SEC over its cryptocurrency trading business).

Both Binance and Coinbase have once again voiced their dissatisfaction with the SEC’s approach of regulation by enforcement rather than by guidance. But what can be said for sure is that in the filing, the SEC made it clear that some crypto assets are unregistered securities.

Are crypto assets, or at least those listed in lawsuits against Binance and Coinbase, securities?

The SEC clearly thinks the answer is yes, and Coinbase’s efforts to overturn the SEC’s thinking are likely to be futile.

binance case

Binance has also taken a stand against the lawsuit, saying in a statement that it has been cooperating with the SEC investigation and working toward a “negotiated settlement.”

“While we take the SEC complaint seriously, it is not subject to SEC enforcement action except in an emergency. We will do everything in our power to protect our platform,” Binance said. .

“Unfortunately, the SEC’s refusal to engage productively with us is an example of the SEC’s erroneous and conscious refusal to provide much-needed clarity and guidance to the digital asset industry. It’s nothing more than

Of course, there are some significant differences between the Binance and Coinbase lawsuits. What Coinbase is facing is the mundane of “listing securities but not registering as a broker, exchange, or clearing house”.

Meanwhile, Binance has been accused of surreptitiously accessing Binance US customer funds and misappropriating them in CEO Zhao’s personal company.

In various tweets, Binance US said the SEC has not raised any concerns about customer funds so far and that its lawyers have already discussed these matters with the SEC.

On June 13th, a hearing will be held regarding the temporary injunction against Binance US funds. Binance’s response is expected to serve as an indication of the company’s claims to the SEC’s comprehensive complaint.

｜Translation: coindesk JAPAN
｜Editing: Takayuki Masuda
| Image: Coinbase CEO Armstrong and Binance CEO Zhao (CoinDesk Archives)
｜Original: Providing Regulatory Clarity (Binance and Coinbase Edition)