Cryptocurrency giant Binance finds itself at the forefront of a monumental legal confrontation with U.S. securities regulators. A federal court has given the green light to most of the Securities and Exchange Commission’s (SEC) allegations against Binance, which include charges tied to Binance’s staking program, the sales of its native BNB token, and anti-fraud violations.
The SEC’s claim focuses on former Binance CEO Changpeng ‘CZ’ Zhao, highlighting his role as a “control person” at the helm of the crypto exchange’s operations. Furthermore, the SEC argues that Binance ought to have registered under the Exchange Act, adhering to the regulatory standards that come with such an official status.
However, not all claims by the SEC have successfully stuck. The court dismissed accusations concerning the secondary market transactions of the BNB token, as well as all complaints involving the trading of the Binance USD stablecoin. This partial dismissal of the SEC’s charges, according to finance lawyer Scott Johnsson, represents a significant setback for the agency’s campaign to reign in the digital currency industry.
FOX Business reporter Eleanor Terrett suggests that this judicial outcome could have ripple effects throughout the sector, potentially advantaging other cryptocurrency firms like Coinbase, Kraken, and ConsenSys, who are embroiled in their own legal wrangles.
This courtroom episode is but a segment of the broader legal saga between the SEC and Binance, which ignited in June 2023 when the SEC filed a suit alleging that the exchange facilitated the sale of unregistered securities and carried out unauthorized activities within the United States. Despite these ongoing legal challenges, Binance maintains its stature as the world’s largest cryptocurrency exchange, boasting over 200 million users and managing assets worth approximately $100 billion.
In a broader context, the SEC, under the chairmanship of Gary Genser, contends that a significant number of digital tokens fit the bill of unregistered securities and should, therefore, fall under its regulatory purview. This stance has drawn critique from within the digital asset community, which perceives the SEC’s actions as regulatory overreach.
Binance’s standing in the U.S. has also faced direct action from state regulators, with seven states either revoking or choosing not to renew the company’s money transmitter license. Additionally, Binance’s former CEO Zhao is currently serving a four-month prison term for violating anti-money laundering statutes.
The unresolved issue at the heart of such regulatory disputes is the classification of digital tokens: are they securities or not? Despite numerous legal battles, this crucial question continues to dangle without a definitive answer from the SEC. Meanwhile, the crypto community awaits legislative clarification from Congress to navigate the unsteady terrain of digital asset regulation.
