As the United States Securities and Exchange Commission (SEC) intensifies its regulatory scrutiny, the cryptocurrency market is likely to undergo a significant drop. The most recent target is Binance, the largest cryptocurrency exchange in the world. Which is accused of multiple securities law violations.
The news sent waves through the cryptocurrency market, leading to a significant decline in Coinbase‘s shares and other crypto-related equities.
Market Drop as SEC Targets Binance
Coinbase, a significant cryptocurrency exchange based in the United States, had its stock drop by more than 12%. These changes happened after the news broke that the SEC was investigating Binance, the world’s largest crypto trading platform, for possible securities violations.
The news that Binance was being sued spread quickly through the cryptocurrency market. It made Coinbase’s stock fall, which also hurt other crypto-related stock companies and currencies.
The price of Bitcoin went down by 5.3%, and for the first time since mid-March, it went below $26,000. The stocks of MicroStrategy, Marathon Digital Holdings, and Riot Platforms also went down significantly.
🔐📉#Bitcoin drops after SEC files 13 charges against Binance, founder Changpeng Zhao.
— Walletor (@walletorapp) June 5, 2023
The sudden drop in price shows how actions by regulators in the cryptocurrency industry can have far-reaching implications.
Coinbase has had problems with the SEC on its own. Still, the increased attention from regulators in the case against Binance is a cause for concern for all platforms that help people trade cryptocurrencies. As the SEC keeps pushing for more transparency and compliance with securities laws, the crypto market is getting ready for what could be more trouble.
Unregistered Operations and Misguided Funds
The SEC’s lawsuit was filed in federal court in Washington, D.C. It accuses Binance and its CEO, Changpeng ‘CZ’ Zhao, of operating an unregistered trading firm and directing consumer funds to a trading fund managed by Zhao.
According to the SEC, Binance purposefully avoided US regulatory oversight while providing securities-related services to US customers. As a result, billions of dollars in US investor capital are at risk.
Furthermore, according to the lawsuit, Binance deceived customers by claiming to have risk measures in place to oversee manipulative trading. It compromised the cryptocurrency market’s integrity.
In its recent statement, Binance said, “While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis. We intend to defend our platform vigorously. Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry.”