Over the past week, Coinbase and Binance have faced challenges due to increased regulatory scrutiny, coinciding with bear market conditions in the wake of the US Securities and Exchange Commission (SEC) charges. Binance faced additional regulatory hurdles on a global scale, while its US counterpart, Binance.US, successfully settled with the SEC, preventing a complete freeze of its assets.
The SEC has also been in the spotlight as a bill to remove its chairman Gary Gensler has been pushed through Congress. Significant developments also occurred in the SEC vs. Ripple case, in which previously undisclosed internal emails surrounding Bill Hinman’s 2018 letter were made public.
Binance faces international regulatory challenges
After being accused by the US Securities and Exchange Commission (SEC) of potential violations of federal securities laws, Binance has faced additional challenges on the regulatory front, extending beyond the United States.
The Cyprus arm of the exchange has submitted an application to the Cyprus Securities and Exchange Commission (CySEC) requesting that it deregister as a service provider in the country. CySEC disclosed this development, though it did not explain the motivation behind this decision.
Later, a report on June 16 revealed that Binance is preparing to exit the Netherlands. In an official statement, the company acknowledged its intention to withdraw from the country due to its inability to obtain the required regulatory authorization. This decision follows a $3.3 million fine imposed on Binance by Dutch authorities the previous year for operating without the appropriate license.
News broke on June 17th that French authorities were investigating Binance regarding possible involvement in money laundering activities.
According to circulating reports, the investigation into the company’s French unit began last February, with local authorities investigating the exchange for possible illegal actions.
Binance.US has reached a compromise with the SEC
After the US Securities and Exchange Commission (SEC) issued a temporary restraining order (TRO) to freeze Binance.US assets, the exchange responded by filing an opposition to the SEC’s request on June 12.
Binance.US argued that granting this proposal would ultimately harm the very clients whose interests the SEC purports to protect rather than protect.
After considering the arguments presented by the Securities and Exchange Commission and Binance.US, US District Judge Amy Berman refused to approve the SEC’s motion for an emergency asset freeze.
Instead, he urged the SEC and Binance.US to find a mutually acceptable compromise that would protect the interests of investors without the need for extreme measures. As a result, the two parties succeeded in reaching an agreement in this regard.
The consensus was an attempt to introduce a compromise that protects the funds returned to customers on Binance.US. As part of the agreement, Binance will return all customer deposits to the United States, denying access to them by Binance officials.
In response to last week’s accusations, Binance.US reportedly cut its staff. While the number of affected employees has not been verified, sources indicate that around 50 individuals have been laid off, mostly from the Legal, Compliance and Risk departments.
Coinbase aims to grow amid regulatory scrutiny
Despite facing regulatory challenges from the Securities and Exchange Commission, Coinbase attempted to expand its reach and improve its offering this week.
Coinbase has partnered with Bitkey, a Bitcoin wallet application developed by Block, to simplify bitcoin transactions while ensuring control over the private keys. Thanks to this collaboration, Bitkey wallet users can now easily buy, sell and transfer bitcoin using Coinbase Pay on their mobile app or hardware wallet. Although the project is currently in beta testing, it is set to be publicly released later this year.
To provide incentives to users and adapt to the changing landscape, Coinbase Global has chosen to raise rewards for USDC. Users can now enjoy an increased annual return of 4% on their USDC balance, which is a significant increase compared to the previous rate of 2%.
This week, sources also revealed that BlackRock was looking to partner with Coinbase Custody to facilitate a framework for a potential Bitcoin spot fund (ETF).
BlackRock has made progress with the launch of the ETF, and the Coinbase partnership is expected to provide the necessary infrastructure and security measures for the investment vehicle.
The SEC takes center stage and refuses to provide clarity
The US Securities and Exchange Commission also made headlines this week for its enforcement actions. A June 12 report confirmed that the total number of crypto assets the regulator has classified as securities has now expanded to 67 following its accusations against Binance and Coinbase last week.
Together, these assets are worth $100 billion, representing 10% of the global cryptocurrency market cap. These signs prevailed despite the regulatory uncertainty prevailing in the United States.
Contrary to expectations, the SEC chose not to decide on Coinbase’s rule-making petition, even after a direct order from the US Court of Appeals for the Third Circuit. In documents disclosed by Coinbase’s chief legal officer (CLO), Paul Grewal, the SEC refused to commit to any deadline, suggesting a recommendation on Coinbase’s petition could be made within 120 days.
Subsequently, the cryptocurrency exchange filed an application with the US Court of Appeals for the Third Circuit.
Paul Grewal’s request underscores the importance of addressing the SEC’s lack of speed.
Bill to remove Gensler as SEC chairman is gaining support
Amid regulatory issues surrounding the domestic cryptocurrency industry in the United States and the SEC’s ongoing enforcement action in the face of uncertainty, a bill to remove SEC Chairman Gary Gensler made its way to Congress this week.
Lawmakers supporting the bill cite numerous instances of abuse of power as a basis for Gensler’s dismissal. Introduced by Tom Emmer, Speaker of the House, and Rep. Warren Davidson, the “SEC Stabilization Act” seeks to restructure the regulator.
ripple vs. SEC: The Hinman documents are finally open
The lawsuit Ripple vs. The SEC, which spanned several years and included multiple court orders, finally exposed internal SEC documents. These documents relate to Bill Hinman’s 2018 letter and were requested by Ripple.
The documents revealed that the SEC needed clarity among themselves on what the security was. In conversations leading up to the June 2018 letter, Hinman received warnings from several SEC officials that the letter could exacerbate this confusion. However, the documents reveal that Hinman ignored these warnings.
In addition, the documents revealed that Hinman will speak with Vitalik Buterin, the founder of Ethereum, after the speech. This raised speculation about a close collaboration with the Ethereum Foundation, with Hinman specifically opining, in the letter, that ETH was not a security because it was “decentralized enough.”
Ripple CEO Brad Garlinghouse responded in a video that the recently disclosed documents reveal the SEC’s internal disagreement when drafting cryptocurrency regulations. Garlinghouse also drew attention to payments received by Bill Hinman through his law firm, which had affiliations with vested parties in his speeches.
Ripple CEO Garlinghouse stated that Ripple had been in discussions with the SEC about compliance ahead of the lawsuit. They even spoke to former SEC chair Jay Clayton and Hinman, who pointed out that XRP is not considered a security. Despite this, Ripple is surprised to receive Wells’ notice without explicit instructions.