Binance, SEC argue about regulator oversight of cryptocurrencies

  • Previously, the SEC filed 13 charges against Binance, its founder and other cryptocurrency trading companies.
  • The hearing on Monday between Binance and the SEC elicited hot debates about the definition of securities and the authority of the SEC.
  • The judge’s decision could contribute to elucidating the SEC’s authority over the industry.

On Monday, Binance faced in court against the Securities and Exchange Commission (SEC) and provided detailed responses to concerns concerning the classification of tokens that are traded on its platform as securities or not. Hot debates about the authority of the SEC and the boundary between digital assets and securities were rising.

Binance v. the SEC overview

The biggest cryptocurrency exchange in the world, Binance, faced in court with the SEC on Monday. The court questioned both sides on why some cryptocurrencies need to be regarded as securities and governed by SEC regulations.

On June 6, 2023, the SEC filed a lawsuit against Binance Holdings and its former CEO, Changpeng Zhao. The SEC accused 13 charges including lying to customers, neglecting to prevent U.S. investors from accessing Binance.com, misdirecting funds to Zhao’s separate investment funds, and conducting business as an unregistered exchange.

The SEC has brought legal action in complex cases involving cryptocurrency before. The SEC stated it was suing Coinbase the day after its Binance lawsuit. But unlike the SEC’s action against Coinbase, which is Binance’s largest competitor, Binance’s case also involves claims of fraud and market manipulation. The SEC focused on whether crypto assets traded on Binance’s trading platform qualify as securities subject to the SEC regulation, and 12 tokens, including BNB and BUSD, were asserted by the SEC on the exchange securities.

In order to resolve legal disputes involving violations of illegal funding with the Department of Justice and the Commodities Futures Trading Commission, Binance agreed to pay $4.3 billion in November of last year. Although Changpeng Zhao, the company’s CEO at the time, agreed to resign and pleaded guilty to violating U.S. anti-money-laundering law, the case with the SEC has not been settled. The confrontation between the government and cryptocurrency exchanges on Monday was the second such one this month. The result could aid in defining the authority of the U.S. securities regulator to oversee the cryptocurrency industry.

Also read: CZ quits as Binance CEO after $4.3 billion fine for money laundering

Debates on court

Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia questioned the parties throughout the hearing over whether or not BNB, BUSD, and other assets traded on Binance were securities. Although the term “security” was defined by the Securities Act of 1933, many experts base their determination of whether an investment product is a security on a decision made by the U.S. Supreme Court.

In addition, Judge Jackson quizzed the SEC lawyer on the agency’s perceived lack of transparency about the application of its regulations to the crypto sector. The SEC insisted that securities laws are clear and unambiguous. The SEC first targeted businesses that sold digital tokens, but more nowadays under the direction of chair Gary Gensler. Due to their claims that the SEC has overreached its jurisdiction, the regulator is now up against a growing number of wealthy companies.

“It seems like you are trying to say that all digital assets, at the end of the day, have the earmark of securities,” Judge Jackson asked the SEC’s lawyers. “If you are not, where is the boundary of what you are saying?” By assisting in the clarification of the SEC’s authority over the cryptocurrency industry, the judges’ decisions may have an impact on digital assets.

Also read: US DOJ Deliberates Binance Fraud Charges

Sylvia-Shen

Sylvia Shen

Sylvia Shen, an intern reporter at BTW media dedicated in Fintech and Blockchain. She graduated from University of California, Davis. Send tips to s.shen@btw.media.

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