(Bloomberg) — Smaller coins sank into a sharp sell-off in the cryptocurrency market as the Securities and Exchange Commission’s crackdown on major digital asset exchanges spooked investors.
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Cardano’s ADA fell as much as 25% on Saturday before trimming a small portion of the decline, while tokens including Solana’s SOL, Polygon’s MATIC and Avalanche’s AVAX posted double-digit percentage declines.
Bitcoin, the largest digital asset, is down about 3% as of 10:20 am in London. Ether, in second place, fell 5.6 percent, its lowest since late March.
The Securities and Exchange Commission (SEC) earlier this week disrupted the cryptocurrency sector by launching lawsuits against Binance Holdings Ltd.
The Securities and Exchange Commission charged Binance and its founder Changpeng Zhao with mismanaging client funds, misleading investors and regulators, and breaching securities rules. Binance called the SEC action “disappointing” and said it intends to “vigorously” defend its platform.
Coinbase has disputed the SEC’s allegations that it operates an illegal exchange and said it is ready to take the legal battle to the Supreme Court.
More than a dozen tokens have been flagged as unregistered securities in the lawsuits, including Binance’s BNB, Cardano, Solana, and Polygon. The group as a whole came under pressure on Saturday.
SEC audit
While US regulators view Bitcoin as a commodity, SEC chief Gary Gensler has long said that most other coins are subject to the agency’s investor protection laws and that trading platforms must register with the regulator.
But grading specific tokens represents a tougher approach, part of a crackdown on digital assets this year after a rout in 2022 and a series of blowouts, including the bankruptcy of FTX exchange.
Classification as an unregistered security could make it more difficult to trade the tokens if exchanges steer clear of listing them for fear of angering the SEC. Robinhood Markets Inc. said: on Friday that it will be ditching Solana, Cardano, and Polygon, effective June 27.
BNB token, which can be seen as an arbitrator of sentiment towards Binance, lost around 5% to its lowest level since December last year.
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