Gary Gensler, the SEC Chairman has declared war against the cryptospace.
With two back-to-back lawsuits, after a series of aggressive comments and other actions in and out of the courts, America’s top securities regulator has told the world in no uncertain terms that the next wave of financial and technological innovation isn’t welcome in the land of the free.
While Gensler may be acting out a script by the “powers that be”, whosoever they are, the brazen attempts to kill off, snuff out and stamp on the creativity that gives the United States its leadership role in the twenty first century may actually birth the multi-polar world espoused by former President Barrack H. Obama in his speech in Egypt on 4th June, 2009 at Cairo University.
It could have occurred in alternative ways, without the aggression and rancor that Gary Gensler brings to the table with America, taking its leadership role in everything crypto, which will continue way after the last satoshi is mined on the Bitcoin blockchain one hundred and seventeen years from now.
That seems uncertain should the SEC continue to toe this path.
Yet, all is not lost.
But a great many things are definitely going to change.
The cryptospace decided to respond.
Here are a few of the thoughts we all have about the SEC’s “anti-crypto” sentiment.
Tim Frost, CEO at Yield App
“News that the SEC has filed 13 charges against Binance is likely to reignite liquidity concerns in the crypto space. In a whopping 136-page lawsuit, the US regulator accused the world’s largest crypto exchange and its founder, Changpeng “CZ” Zhao, of unlawfully soliciting investors and customers and commingling users’ funds. Most notably, CZ is alleged to have secretly controlled Binance’s US operations in a “web of deception”.
It wouldn’t come as a surprise if Binance is forced to pay a substantial fine as part of a settlement, along with agreeing to potential restrictions on its US trading platform. Although this development carries weight, it shouldn’t impact the long-term fundamentals of BTC and ETH. Over the short term, prices will receive a hit as the market digests the news, but most people who intended to sell after negative news will have already done so over the developments from the past 12 months.
However, it’s crucial to acknowledge the possibility of things worsening. A court ruling could support all of the SEC’s charges and draw similarities between Binance and FTX. This could potentially result in significant losses for millions of users, prompt a prolonged downturn across the industry and bring BTC and ETH to significant lows. The industry would experience widespread layoffs, and crypto would largely fade from public attention for at least five years. That said, the actual outcome may differ, and the industry’s resilience and ability to adapt should not be underestimated.
Yet what’s happening to Binance is nothing new. What we are witnessing is a pattern of behavior from US regulators, against a backdrop of other countries legalizing and supporting crypto. Contrary to the often negative sentiment we see associated with regulation, this development could instead bring positive outcomes. Despite initial concerns over regulatory action, the UAE, UK, and South Korea have emerged as trailblazers, boldly proposing a resilient regulatory framework that has allowed digital assets to thrive.”
Bradley Duke, Founder and Co-CEO at crypto ETP provider ETC Group
“By first going after Binance and then Coinbase in rapid succession, the SEC is sending a clear message to businesses operating in crypto, both foreign and homegrown, “You are not welcome in the US”. There is no regulatory framework for crypto in the US so companies operating in this sector are completely in the dark as to how to be compliant and good corporate citizens. In contrast, Europe’s recently ratified MiCA framework offers up clear rules and guidance to crypto firms, giving comfort to services providers and investors alike – a far more welcoming environment.”
Mikkel Morch, Chairman and Non-Executive Director of crypto hedge fund ARK36
“The news about the Securities and Exchange Commission (SEC) filing charges against Binance entities and founder Changpeng Zhao has significant implications for various stakeholders in the cryptocurrency market.”
“Firstly, for the US as a market for cryptocurrencies, these charges will have far-reaching consequences. The SEC are giving an extremely clear signal of strict financial regulatory oversight in the cryptocurrency industry similar to what is happening in the European Union. It is very clear that the SEC insists that all actors in the US market ensure proper investor protection. In this case Binance is accused of misleading investors, engaging in manipulative trading, and commingling customer assets. The consequence, if Binance is found guilty, may be further erosion of investor confidence in the market, potentially leading to a decrease in participation and investments. The charges by the SEC certainly also emphasise the importance of proper registration and compliance for crypto exchanges operating within the US.”
Consequences for Binance
“Secondly, for Binance itself, these charges could be highly damaging. Binance is one of the largest and most prominent crypto asset trading platforms globally. If found guilty, the reputational damage alone could be significant, leading to a loss of trust from users and backers. Additionally, the potential legal consequences could include substantial fines, penalties, and even the suspension or cessation of operations in the US market. Binance may also face increased scrutiny from regulatory authorities in other jurisdictions, further impacting its operations and expansion plans.”
Wider Cryptocurrency Market Impact
“The charges against Binance highlight the need for enhanced transparency, disclosure, and adherence to regulatory requirements across the industry. It reinforces the urgency for establishing clear regulatory frameworks to govern cryptocurrencies and exchanges to protect investors and maintain market integrity. These events may encourage other regulatory bodies worldwide to review and strengthen their oversight of cryptocurrency platforms and activities. However, other more so-called crypto-friendly jurisdictions with less stringent or more “pro crypto” regulations will certainly also gain a lot of business as is already visibly seen in the UAE, Hong Kong or Singapore. Long-term, if the EU and US are perceived as hostile to the cryptocurrency asset class then most likely more innovation and business will transition to those jurisdictions.”
“The SEC lawsuit against Coinbase, accusing the exchange of operating as an unregistered broker and exchange, adds another layer of complexity to the regulatory landscape for cryptocurrency platforms. With the charges coming just a day after the SEC’s action against Binance, it is evident that the regulatory crackdown on the crypto industry is intensifying.”
“This case could set a precedent for how other exchanges are regulated and may prompt similar actions from regulators worldwide. Coinbase and Binance’s ability to navigate this legal battle will have significant implications for the broader cryptocurrency industry. As two of the most prominent and well-established exchanges, Coinbase and Binance have the resources to contest the SEC’s charges. Their defense strategies and the legal outcomes will influence the regulatory approach towards other exchanges and shape the future of the industry.”
Brandon Zemp Host, Blockhash
“If the SEC continues down this path, there are two possible outcomes,” says Zemp. “The first is a ‘Crypto War’ and legal fight in the United States that will decide the fate of the sector. The second possibility is a mass exodus of investment and innovation from the United States to more favorable countries and territories (Europe, Singapore, Hong Kong, El Salvador, etc.).”
The SEC is claiming that the world’s largest cryptocurrency exchange has taken billions of dollars in customer deposits and sent them to a separate company controlled by Binance’s founder Changpeng Zhao. They are also accusing Binance of lying to regulators and investors about its operations. The real question here is whether or not the SEC is right. Time and time again we have seen the SEC attack Crypto exchanges and Blockchain companies without a clear legal basis, especially in 2023.
Has Binance done anything wrong? I have no idea. But what I do know is that the SEC is damaging the innovation around Crypto in the United States, all for the sake of controlling the industry. Both the U.S. Chamber of Commerce and Congress have condemned the SEC over its stance and legal over-reach in regards to Crypto.
One thing is for certain. If the SEC continues down this reckless path, there are two possible outcomes. The first is a “Crypto War” and legal fight in the United States that will decide the fate of the sector. The second possibility is a mass exodus of investment and innovation from the United States to more favorable countries and territories (Europe, Singapore, Hong Kong, El Salvador, etc.).
The global implications of the SEC aggressively applying an “enforcement through regulation” stance conclude with a loss of innovation in the United States. There are 33 other countries in the world that have proper regulatory guidance on Crypto, and the United States has none. Imagine the damage that would be done if 1,000,000s of U.S. jobs were exported to Hong Kong, Singapore and Europe. The loss of innovation is the single largest threat to the U.S. in the wake of Gary Gensler’s trail burning mentality.
Crypto is also becoming a huge talking point for the upcoming presidential elections in 2024, with candidates such as RFK and Ron DeSantis showing support for the technological innovation around Web3 and Blockchain. The road ahead is a bit brighter than the current dilemma, but a lot of long-term damage is being done now and reform needs to come to agencies like the SEC.”
About Brandon Zemp
Brandon Zemp is an entrepreneur and investor as well as the Forbes Books author of The Future Economy: A Crypto Insider’s Guide to the Tech Dismantling Traditional Banking.
Zemp made his mark early on as a trader in the fast-paced crypto market, and soon established his first company, BlockHash LLC, a blockchain consultancy providing educational resources for small business owners, students, developers, and investors. In Colombia,
Zemp has started another blockchain consultancy, Blocolombia SAS, which is tailored to the Colombian economy. With Blocolombia, he has managed projects for politicians and other agencies in Colombia while helping pioneer the country’s blockchain ecosystem.
Zemp is host of the podcast Blockhash:Exploring the Blockchain, where he interviews top executives and founders in the industry.
Will Paige, Crypto Analyst at Insider Intelligence
“The SEC’s latest lawsuit highlights its increasingly aggressive stance in regulating crypto firms. In the absence of a regulatory framework in the US, the SEC looks intent on policing the space through enforcement as part of a wider crackdown on noncompliance.”
“The regulator’s suits against Coinbase, generally viewed as one of the more respected crypto firms, and the world’s biggest crypto platform Binance, shows it’s prepared to legally challenge companies it believes aren’t keeping to rules, regardless of their size. Crypto firms may find out the hard way that operating by the ‘better to ask forgiveness than permission’ theory lands them in hot water.”
“For the broader crypto industry, lawsuits against two of the best-known and largest companies will knock already weak consumer confidence in cryptocurrencies.”
Stefan Rust, CEO at Truflation and Former CEO at Bitcoin.com
“US regulators, led by Gary Gensler at the SEC, appear to be out to unseat the largest companies in the cryptocurrency space. Gensler’s continued refusal to define digital assets – even in the face of demands from Congress and beyond – leaves companies like Binance and Coinbase vulnerable to enforcement action at any time.
Meanwhile, though, approvals continue to go through for established incumbents. Just yesterday, while SEC is suing Binance and other leading blockchain projects, the Commodity Futures Trading Commission approved an amended order of registration for CBOE Clear Digital, which will allow it to provide clearing services for digital asset futures.
It does seem surprising that these enforcement actions come at a time when other countries – most notably China via Hong Kong – are opening up to crypto. And indeed, at a time that BRICs and other nations are increasingly exploring ways to reduce their reliance on the US dollar.
This continued drive to remove the biggest crypto firms from the US, however, will leave a large hole in the industry – a hole that can be filled by JP Morgan, Fidelity, and other US-based financial behemoths that have been expanding their cryptocurrency offerings. Indeed, it seems clear that the SEC seems to favor Jamie Dimon, David Solomon, and James Gorman over entrepreneurs like Elon Musk, Mark Zuckerberg, and Brian Armstrong.
As for CZ and Binance, they will fight criminal charges in the courts as they have clearly been preparing to do so. However, this will most likely still lead to the exit of Binance from the US, shortly followed by Coinbase. And this could be the end game for the SEC.”
Bion Behdin, CRO at First AML
“Crypto companies are feeling the heat when it comes to anti-money laundering fines. Last year saw a mammoth 90 percent rise in fines levied at crypto companies, showcasing the growing hidden threat of money laundering in this anonymous virtual world. The news today highlights that this scrutiny is not going to decrease, and no matter how large you are, you have to be secure.
The crypto world gives money launderers their favourite asset: anonymity. This, combined with the ability to move money across borders without any institutional involvement, creates a hotbed for illicit activity.
It’s an example of how traditional methods of placing dirty money into a cash-based business have embraced new mediums and channels of laundering funds, such as with [multiplayer games and crowdfunding]. Similar to other regulatory efforts to define and contain the virtual world, crypto doesn’t yet have the regulatory oversight necessary to curtail this form of money laundering.
With all this, it’s no surprise that our own research has shown that 70 percent of individuals working in compliance have expressed concern about the growing threat of money laundering via cryptocurrencies in business. This should act as a warning for businesses to implement the correct AML procedures and technology to avoid falling foul of such activity.”