Gary Gensler, Chair of the U.S. Securities and Exchange Commission, takes his seat before the beginning of the Senate Banking, Housing, and Urban Affairs Committee hearing on Oversight of the U.S. Securities and Exchange Commission on Tuesday, Sept. 14, 2021.
Bill Clark | CQ-Roll Call, Inc. | Getty Images
SEC Chair Gary Gensler stepped up his attack on the crypto industry this week, suing Coinbase and Binance for securities violations and casting doubt on the longer term of token trading.
Crypto investors took the hint. 4 of the ten most precious coins plunged in value by not less than 15% this week, in line with CoinMarketCap, a sell-off sparked by the lawsuits and Gensler’s interview with CNBC on Tuesday, by which he said “we do not need more digital currency.”
In alleging that Coinbase was acting as an unregistered broker and exchange, the Securities and Exchange Commission said not less than 13 crypto assets available to the corporate’s customers were considered “crypto asset securities.” They include Solana’s SOL token, Cardano’s ADA token, Polygon’s MATIC coin and Protocol Labs’ Filecoin token (FIL).
Trading app Robinhood followed on Friday by announcing that, starting June 27, it’s going to now not support trading of coins from Cardano, Polygon and Solana. The corporate said “no other coins are affected.” Also on Friday, Crypto.com said it’s going to shut down its U.S. institutional exchange.
“No other coins are affected and your crypto continues to be secure on Robinhood,” the corporate said in a post.
Cardano’s coin, the seventh-most useful cryptocurrency, in line with CoinMarketCap, tumbled 20% up to now week. Solana, ranked ninth, dropped 18%. Polygon, ranked tenth, also slid 18%. Filecoin, which is further down the list, dropped 19%. Binance’s BNB token, ranked fourth, fell 16%.
Bitcoin and ethereum, the 2 hottest cryptocurrencies, were more stable, each declining lower than 5%.
Gensler, who was appointed to go the SEC by President Joe Biden in 2021, has spent much of the past yr going after crypto firms and exchanges for effectively selling highly speculative and dangerous securities dressed up as something else.
From high-profile fraud cases involving Sam Bankman-Fried’s FTX and Do Kwon’s Terraform Labs to dozens of charges involving coin offerings and alleged false marketing, Gensler has made the once-burgeoning crypto industry his primary takedown goal.
“The investing public has the advantage of U.S. securities laws,” Gensler said in an interview with CNBC’s “Squawk on the Street” on Tuesday. “Crypto needs to be no different, and these platforms, these intermediaries need to come back into compliance.”
Gensler’s TV appearance got here after the SEC sued Coinbase and said the corporate needs to be “permanently restrained and enjoined” from “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency.”
Shares of Coinbase, the one major crypto exchange that is publicly traded within the U.S., sank 18% this week. Coinbase legal chief Paul Grewal told CNBC in a press release that the SEC’s approach to enforcement without laying out clear rules is “hurting America’s economic competitiveness and firms like Coinbase which have a demonstrated commitment to compliance.”
A day earlier, in its lawsuit against Binance, the SEC alleged that the corporate and founder Changpeng Zhao comingled billions of dollars price of user funds and sent them to a European company controlled by Zhao.
While Binance claims no official headquarters and does most of its business overseas, the SEC’s grievance cited a senior executive allegedly telling a compliance officer that the corporate was operating as a “[f—ing] unlicensed securities exchange within the USA bro.”
In a blog post, Binance said it was “disillusioned” within the SEC’s suit and said it had “engaged in extensive good-faith discussions to achieve a negotiated settlement to resolve their investigations.”
Others named within the SEC lawsuit also weighed in after this week’s charges landed.
The Cardano Foundation, which works to advance use of its namesake technology, said in a tweet that it disagrees with the labeling of its ADA coin as a security and “we stay up for the continued engagement with regulators and policymakers to realize legal clarity and certainty on these matters.”
Protocol Labs, the developer of Filecoin, said in a series of tweets on Thursday that the token is critical to the operation of its distributed storage network. It’s how people buy storage from providers, and Protocol says the fee is far lower than what users would pay Amazon Web Services or Google Cloud.
“Filecoin is a cryptocurrency-powered global storage network preserving humanity’s most significant information, not a security,” Protocol Labs tweeted.
In its 101-page grievance against Coinbase, the SEC made clear that no matter whether these tokens have some level of utility, they’ll easily be purchased on the app by individuals who don’t have any interest beyond investing. And Coinbase generates revenue by executing those trades.
“Coinbase makes these crypto assets available for trading,” the SEC said, “without restricting transactions to those that might acquire or treat the asset as anything apart from as an investment.”
WATCH: Ethereum, bitcoin communities descent on Prague