Bitcoin Dropped after the SEC Sued Binance, as US Regulatory Tightening Continues

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SEC Sued Binance

The US Securities and Exchange Commission (SEC) on Monday, filed thirteen charges against major crypto exchange Binance and linked-entities, as well as is CEO and founder Changpeng Zhao, for various securities law violations. These include the operation of unregistered exchanges, unregistered offer and sale of crypto assets, misleading investors, failure to restrict US clients from accessing its global platform and more. [1]

Binance.US is the entity for US investors, but the SEC alleges that the crypto firm "secretly" allowed high-value U.S. customers to continue trading on the Binance.com platform, despite public claims that it was restricting such access. The complaint also accused the defendants of "commingling billions of dollars" of investor funds and sending them to a third party owned by Mr Zhao.

SEC Chair Gary Gensler accused Binance and its CEO of engaging in a "web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law".

BInance Response

The company issued a response, expressing its disappointment from the SEC action, saying that it has "actively cooperated" with the regulator and worked to answer its questions and address concerns. The SEC "abandoned" this process according to Binance, choosing instead to "act unilaterally and litigate". [2]

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Binance accused the watchdog of being determined to regulate the digital assets industry with "the blunt weapons of enforcement and litigation", rather than adopting a more nuanced approach. It also complained that labeling certain assets and services as securities, adds to the problems.

Regulatory Scrutiny

This is the latest example of a tightening regulatory environment, especially in the US, with the Securities and Exchange Commission (SEC) leading the charge. At the core of its efforts, is the fact that it considers crypto assets and services as securities, a view that has been contested by crypto firms.

In late March, Coinbase had received a notice from the Commission for potential violations of securities laws, in regards to some of the firm's digital assets and staking service [3]. Its CEO Brian Armstrong had criticized the SEC for "regulation by enforcement" [4], after the regulator forced Kraken to shut down its staking-as-a-service program, which it considers as a security. [5]

However, crypto firms don't seem to consider their products and services as securities and there is some regulatory overlapping. Back in March, Binance had been sued by the US Commodity Futures Trading Commission (CFTC) for violations of Commodity Exchange Act (CEA) and CFTC regulations. [5]

BTC/USD Analysis

Bitcoin has made an impressive start to the year after the 2022 slump, but dropped in May. The news of the SEC lawsuit against Binance sent it lower on Monday, threating the critical lower border of the Daly Ichimokou Cloud and the 38.2% Fibonacci of the 2022 low/2023 high advance. This creates risk for further slide, but new catalyst will be required for the 20K region to be tested.

On the other hand, the move looks stretched and BTC/USD steadies today, trying to defend the aforementioned critical support. Successful effort would give it the chance to take another crack at the upper Ichimokou band (at around 24,800) and open the door to new 2023 highs towards 32,397, but we are cautious at this stage.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 05 Jun 2023 https://www.sec.gov/news/press-release/2023-101

2

Retrieved 05 Jun 2023 https://www.binance.com/en/blog/ecosystem/sec-complaint-aims-to-unilaterally-define-crypto-market-structure-8707489117122437402

3

Retrieved 05 Jun 2023 https://www.coinbase.com/blog/we-asked-the-sec-for-reasonable-crypto-rules-for-americans-we-got-legal

4

Retrieved 05 Jun 2023 https://twitter.com/brian_armstrong/status/1623459318476726272

5

Retrieved 23 Jul 2024 https://www.sec.gov/news/press-release/2023-25

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