The US Securities and Exchange Commission (SEC) has filed 13 counts of charges against cryptocurrency exchange Binance and its founder Changpeng Zhao, which came as a shock to the digital currency market.
In an official statement, the SEC alleged that the company and its executive had violated US securities laws, engaged in manipulative transactions, endangered investors' funds and more. In response, Binance said it would fight for its rights under the law. The lawsuit could have implications for other exchanges as well, as the SEC has classified at least 61 digital currencies as securities.
The legal action taken by the regulator against Binance has also affected other crypto-exchanges in the US, including Coinbase and Kraken. They must decide whether to remove these tokens or keep them on the list.
The regulator filed a complaint stating that certain assets were subject to its powers, such as BNB from Binance (worth $44 billion), ADA from Cardano, SOL from Solana, MATIC from Polygon, FIL from Filecoin and ALGO from Algorand, among others.
Gary Gensler, chairman of the SEC, has regularly stated that most tokens are subject to the agency's investor protection laws and therefore trading platforms must register with the regulator.
US crypto exchanges now face a difficult choice: whether to withdraw these assets from circulation. Market makers, on the other hand, will no longer be able to market tokens, which are now treated as securities.
However, Coinbase has previously made a statement that it cannot remove tokens that the SEC considers to be securities until the final outcome of the court ruling has been determined. Consequently, exchanges cannot remove tokens until a court ruling has been issued. Colin Wu, a crypto journalist, reported that at least 37% of Coinbase's net income (COIN) would be at risk if the SEC focuses on token trading and stacking services provided by the exchange.
The SEC has filed charges against Binance and its chief executive Changpeng Zhao for misinforming investors and violating securities laws. As the situation unfolds, there has been an outflow of funds from the platform. According to 0xScope, in just one hour after the SEC filed its lawsuit against Binance, about $1.4 billion flowed out of total reserve assets worth $52.9 billion, equivalent to 2.6 per cent.
This legal battle will undoubtedly be a protracted one in which both sides will try to protect their interests; who will be the winner in this case will be decided by the court.
