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U.S. financial regulators started enforcing cryptocurrency rules and regulations in 2023.
Investor Alarm: Popular Tokens on Binance Flagged as Unregistered Securities
The U.S. Securities and Exchange Commission (SEC) has taken serious action against many crypto platforms. This includes Gemini, Genesis, Kraken, Beaxy, Bittrex, and, most recently, Binance. These actions happened in the first half of the year.
Numerous distinctive factors have made the Binance case stand out. SEC has specifically identified numerous tokens listed on Binance as unregistered securities, along with allegations of mishandling customer funds and wash trading. Investors are concerned about this revelation, given the tokens’ popularity.
U.S. cryptocurrency exchanges reevaluate their asset listings and carefully consider which tokens they allow traders to trade.
The SEC filed a complaint on Monday, June 5, saying ten cryptocurrencies weren’t registered as securities. Some of them are Solana (SOL), Polygon (MATIC), BNB (BNB), Cardano (ADA), Binance USD (BUSD), and Cosmos (ATOM). The Decentraland (MANA), Sandbox (SAND), COTI (COTI), and Axie Infinity (AXS).
Cryptocurrencies like Binance’s two tokens are among the most valuable and widely used. Popular U.S. crypto exchanges like Coinbase and Kraken support them. According to CoinMarketCap data, Coinbase has a market for ADA/USD, the second largest Cardano cryptocurrency market.
This is because Binance’s tokens are built on secure blockchain technology and are backed by reliable financial institutions. They are also extremely easy to use and store, making them attractive to investors. In addition, the liquidity of these tokens is high, making it easier for investors to buy and sell them quickly.
SEC vs. Binance: Unregistered Securities and Battle for Compliance
The SEC considers these assets unregistered securities, which means they should have been regulated. Exchanges listing these assets must decide whether they will delist them or face SEC enforcement.
The SEC has declared these assets to be unregistered securities, which means the exchanges offering them should have registered them with the SEC for trading. Without registration, the exchanges are operating illegally and can face stiff penalties from the SEC if they do not delist them.
The SEC sued Ripple Labs for selling XRP as an unregistered security, which led major U.S. exchanges to suspend trading.
Businesses and exchanges are struggling to balance compliance with the potential impact on trading volumes following the recent SEC action against Binance.
Regulatory scrutiny reflects the growing interest in cryptocurrencies from financial authorities, who want to establish clear guidelines and protect investors. Crypto ecosystems need to comply with securities laws.
US crypto exchanges face regulatory challenges and have difficulty competing with international exchanges. While Binance’s market share declined, U.S. exchanges couldn’t capture that opportunity, which shifted trading volume to overseas exchanges.
This is because U.S. crypto exchanges are subject to stricter rules and regulations compared to international exchanges. This makes it more difficult for them to remain competitive, as they must adhere to more stringent compliance requirements and have less flexibility in their operations.
The SEC’s case against Binance and a notice of potential enforcement action hit Coinbase, a major U.S. exchange, with their own hurdles. Because of these events, U.S. exchanges must navigate a complex environment and balance regulation with competitiveness.
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