Binance SEC lawsuit causes crypto shares to drop.

Cryptocurrencies and Shares Tumble as SEC Sues Binance

By Hannah Lang, John McCrank and Sinéad Carew

The U.S. Securities and Exchange Commission sued Binance and its CEO Changpeng Zhao for secretly controlling Binance.US as part of a “web of deception” to evade U.S. laws, among other charges.

This news dealt a heavy blow to the cryptocurrency industry, causing cryptocurrencies and shares in crypto and blockchain-related companies to tumble on Monday. Bitcoin, the world’s biggest cryptocurrency, fell 5.45% after dropping to its lowest level since mid-March. Binance’s cryptocurrency also fell 9.72%.

SEC’s Aggressive Approach to Cryptocurrency Industry

The charges filed in a federal court in Washington, D.C., are the latest in a string of enforcement actions brought by the agency in a bid to curtail the cryptocurrency industry, which SEC Chair Gary Gensler has described as “the wild West.”

The SEC crackdown has prompted some crypto companies to increase compliance, spike products, and expand overseas, moves that some marketwatchers said would likely be accelerated by this latest action against the world’s largest crypto exchange.

“This is yet another targeted attack that is devastating in the crypto ecosystem. Pretty soon, the SEC won’t have anyone left to sue,” said John Reed Stark, a former chief of the SEC’s Office of Internet Enforcement.

In statements, Binance said it had been cooperating with the SEC’s probes and had “worked hard to answer their questions and address their concerns” including by trying to reach a negotiated settlement.

“With its complaint today, the SEC abandoned that process and instead chose to act unilaterally and litigate. We are disheartened by that choice,” the company said.

The SEC’s move to abandon a settlement and move to litigate underscores the aggressiveness with which it has approached the cryptocurrency industry, which the agency says has violated its rules on trading and securities issuance.

Impact on Crypto Companies

Shares of Coinbase were down 9.1% on the news of the SEC’s charges against Binance. Crypto miner Riot Platforms Inc was off 8.8% while Marathon Digital was down 8.4%, and Hut 8 Mining was off 4.6%.

Following some of the SEC’s actions against crypto companies this year, several firms have invested in expanding their operations outside of the U.S. Both Coinbase and crypto exchange Gemini launched international exchanges for crypto derivatives in May.

Still, the regulatory actions in the U.S. “highlight the need to establish safeguards in these markets to meet the expectations of investors and customers,” said Rajeev Bamra, senior vice president and head of decentralized finance and digital assets strategy at Moody’s Investors Service.

“Consequently, these charges have the potential to reshape the regulatory landscape for digital assets,” he said.

Conclusion

The SEC’s latest action against Binance has sent shockwaves through the cryptocurrency industry, causing cryptocurrencies and shares in crypto and blockchain-related companies to tumble. The SEC’s aggressive approach to the industry has prompted some companies to increase compliance and expand overseas, while others have invested in expanding their operations outside of the U.S. The impact of these charges has the potential to reshape the regulatory landscape for digital assets.