"Real Intent Here Appears To Be To Make Headlines" - Binance Responds To SEC, Bitcoin Extends Losses

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by Tyler Durden
Monday, Jun 05, 2023 - 04:45 PM

Update (1240ET): Binance has responded to the SEC allegations in a blog post: "SEC Complaint Aims to Unilaterally Define Crypto Market Structure"

We are disappointed that the U.S. Securities and Exchange Commission chose to file a complaint today against Binance seeking, among other remedies, purported emergency relief.  From the start, we have actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns.  Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations.  But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate.  We are disheartened by that choice. 

While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis. We intend to defend our platform vigorously.  Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry. 

Today’s action is another in a line of examples where, as with other crypto projects facing similar suits, the Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology. Unilaterally labeling certain tokens and services as securities – even ones over which other U.S. authorities have asserted jurisdiction – only compounds these problems.

Perhaps most surprising, the SEC’s actions undermine America’s role as a global hub for financial innovation and leadership.  Digital asset laws remain largely undeveloped in much of the world, and regulation by enforcement is not the best path forward.  An effective regulatory framework demands collaborative, transparent, and thoughtful policy engagement—a path the SEC has abandoned.

And, to be clear: any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong, and there is zero justification for the Staff’s action in light of the ample time the Staff has had to conduct their investigation.  All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure, and we will vigorously defend against any allegations to the contrary.  Rather, the SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators—and investors do not appear to be the SEC’s priority.  Because of our size and global name recognition, Binance is an easy target now caught in the middle of a U.S. regulatory tug-of-war. 

It seems based on these developments that the SEC’s goal here was never to protect investors; if that were truly the case, the Staff would have thoughtfully engaged with us on the facts and in our efforts to demonstrate the safety and security of the Binance.US platform.  The SEC’s real intent here, instead, appears to be to make headlines. 

We will continue to cooperate with regulators and policymakers in the U.S. and across the globe because that is the right thing to do.  And Binance remains committed to productive engagement to ensure the next generation of cryptocurrency regulation fosters innovation while implementing and ensuring important consumer protections.  Because Binance is not a U.S. exchange, the SEC’s actions are limited in reach.  Still, we stand with digital asset market participants in the U.S. in opposition to the SEC’s latest overreach, and we are prepared to fight it to the full extent of the law. 

We will work alongside industry partners to defend this important technology from misguided lawsuits.  And we will maintain our unceasing efforts to deliver a safe and trusted platform for our users that holds true to our core value of furthering the freedom of money.

Bitcoin continues to plunge...

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In a not-so-surprising headline, WSJ reports that the SEC on Monday sued Binance, the world’s largest cryptocurrency exchange, alleging the overseas company operated an illegal exchange in the U.S.

The SEC lawsuit also named Changpeng Zhao, Binance’s founder and controlling shareholder, as a defendant. The SEC filed the case in federal court in the District of Columbia.

As a reminder, the CFTC sued Binance and Zhao himself in late March for allegedly violating derivatives regulations, and accused it of having “sham” compliance.

Binance also faces a Justice Department investigation over its program to detect money laundering, according to people familiar with the matter.

As usual, the initial kneejerk reaction to any regulatory headline is to 'sell' crypto.

Bitcoin is extending losses below $27,000...

And Ethereum accelerated below $1900...

Binance own token BNB is plunging...

Additionally, Bloomberg reports that Binance’s payments partner in Australia had abruptly cut it off, meaning local customers couldn’t deposit Aussie dollars on the platform via bank transfer.

The hit to business was immediate, with Binance halting all Aussie trading pairs about two weeks later, along with bank withdrawals of the local currency. 

Add one more headache to the swelling list of challenges facing Richard Teng, the civil servant-turned-crypto executive who’s seen as a possible heir to Binance’s embattled chief executive officer, billionaire Changpeng “CZ” Zhao.

Binance still handles more trading than all other top centralized crypto exchanges combined, yet never has its position seemed so precarious.

In a tweet, Zhao said Binance hadn’t seen the complaint and would respond once it did.

“Our team is all standing by, ensuring systems are stable, including withdrawals, and deposits,” he added, referring to the possibility of customers pulling funds.