securities laws and we're asking them to come into compliance," Gensler told CNBC.Ĭrypto companies refute that tokens meet the definition of a security, say the SEC's rules are ambiguous, and that the SEC is overstepping its authority in trying to regulate them. "The whole business model is built on a noncompliance with the U.S. The SEC also this year sued Beaxy Digital and Bittrex Inc for failing to register as an exchange, clearing house and broker. While a few crypto companies are licensed as alternative system trading systems, a type of trading platform used by brokers to trade listed securities, no crypto platform operates as a full-blown stock exchange. More recently, it has taken aim at unregistered crypto broker dealer, exchange trading and clearing activity. SEC Chair Gary Gensler has long said tokens constitute securities and has steadily asserted its authority over the crypto market, focusing initially on the sale of tokens and interest-bearing crypto products. Supreme Court cases to determine if an investment product constitutes a security. The Securities Act of 1933 outlined a definition of the term "security," yet many experts rely on two U.S. Securities, as opposed to other assets such as commodities, are strictly regulated and require detailed disclosures to inform investors of potential risks. "The SEC is making life nearly impossible for several altcoins and that is actually driving some crypto traders back into bitcoin," explained Oanda's Moya. It was trading just below $27,000 at 0410 GMT. Leading cryptocurrency bitcoin has been a paradoxical beneficiary of the crackdown.Īfter an initial plunge to a nearly three-month low of $25,350 following the Binance suit, bitcoin rebounded by more than $2,000, exceeding the previous day's high. Oanda senior market analyst Ed Moya said the SEC "looks like it's playing Whac-A-Mole with crypto exchanges," and because most exchanges offer a range of tokens that operate on blockchain protocols targeted by regulators, "it seems like this is just the beginning." Paul Grewal, Coinbase's general counsel, in a statement said the company will continue operating as usual and has "demonstrated commitment to compliance." Shares of Coinbase's parent Coinbase Global Inc (COIN.O) closed down $7.10, or 12.1%, at $51.61 after earlier falling as much as 20.9%. The SEC said Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.Ĭoinbase suffered about $1.28 billion of net customer outflows following the lawsuit, according to initial estimates from data firm Nansen. In its complaint filed in Manhattan federal court, the SEC said Coinbase has since at least 2019 made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors. "If the SEC prevails in either case, the cryptocurrency industry will be transformed." "The two cases are different, but overlap and point in the same direction: the SEC's increasingly aggressive campaign to bring cryptocurrencies under the jurisdiction of the federal securities laws," said Kevin O'Brien, a partner at Ford O'Brien Landy and a former federal prosecutor, adding, however, that the SEC has not previously taken on such major crypto players. If successful, the lawsuits could transform the crypto market by successfully asserting the SEC's jurisdiction over the industry which for years has argued that tokens do not constitute securities and should not be regulated by the SEC. The SEC accuses Binance and its CEO Changpeng Zhao of operating a "web of deception". Securities and Exchange Commission (SEC) on Monday took aim at Binance, the world's largest cryptocurrency exchange. securities regulator sued cryptocurrency platform Coinbase on Tuesday, the second lawsuit in two days against a major crypto exchange, in a dramatic escalation of a crackdown on the industry and one that could dramatically transform a market that has largely operated outside regulation. NEW YORK, June 6 (Reuters) - (This June 6 story has been refiled to change the corporate name to Bittrex Inc from Bittrex Global in paragraph 16)
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