Crypto tokens plummeted amid fears that Gensler would increase SEC crackdowns

Gary Gensler, Chairman of the US Securities and Exchange Commission, takes his seat prior to the start of the Senate Committee on Banking, Housing and Cities Affairs Committee hearing on the US Securities and Exchange Commission oversight on Tuesday, September 14 2021, a.

Bill Clark | CQ Roll Call, Inc. | Getty Images

SEC Chairman Gary Gensler this week stepped up his attack on the crypto industry and sued Coinbase and Binance over securities violations and doubts about the future of token trading.

Crypto investors got the hint. According to CoinMarketCap, four of the top 10 coins are down at least 15% in value this week, a selloff sparked by the lawsuits and Gensler’s interview with CNBC on Tuesday, in which he said, “We don’t need another digital currency.”

Claiming that Coinbase operated as an unregistered broker and exchange, the SEC stated that at least 13 crypto assets available to the company’s customers would be considered “crypto asset securities.” These include Solana’s SOL token, Cardano’s ADA token, Polygon’s MATIC token, and Protocol Labs’ Filecoin (FIL) token.

trading app Robin Hood Friday was followed by the announcement that as of June 27, trading of Cardano, Polygon, and Solana coins will no longer be supported. The company said “no other coins are affected.” Also on Friday, announced that it was shutting down its US institutional exchange.

“No other coins are affected and your crypto is still safe with Robinhood,” the company said in a post.

According to CoinMarketCap, Cardano’s coin, the seventh most valuable cryptocurrency, is down 20% over the past week. Solana, in ninth place, fell 18%. Polygon, which ranks at number 10, was also down 18%. Filecoin, which is further down the list, fell 19%. Binance’s BNB token, which ranks fourth, fell 16%.

Bitcoin And etherthe two most popular cryptocurrencies, were more stable, each falling less than 5%.

Gensler, who was appointed chief of the SEC by President Biden in 2021, has spent much of the past year stalking cryptocurrency firms and exchanges for effectively selling highly speculative and risky securities disguised as something else.

From high-profile scams involving Sam Bankman-Fried’s FTX and Do Kwon’s Terraform Labs, to dozens of charges related to coin offerings and alleged false marketing, Gensler has made the once-burgeoning crypto industry his primary target.

“Investing audiences benefit from US securities laws,” Gensler said Tuesday in an interview with CNBC’s Squawk on the Street. “Crypto shouldn’t be any different, and these platforms, these intermediaries need to abide by the regulations.”

Gensler’s TV appearance comes after the SEC sued Coinbase, saying the company should be “permanently barred and prohibited” from “operating its crypto-asset trading platform as an unregistered national securities exchange, broker and clearing house.”

Shares of Coinbase, the only major crypto exchange publicly traded in the U.S., fell 18% this week. Paul Grewal, Coinbase’s legal chief, told CNBC in a statement that the SEC’s approach to enforcement without laying out clear rules “harms America’s economic competitiveness and companies like Coinbase that have a proven track record of compliance.”

A day earlier, in its lawsuit against Binance, the SEC alleged that the company and founder Changpeng Zhao had collected billions of dollars worth of user funds and sent them to a European company controlled by Zhao.

While Binance claims it has no official headquarters and conducts the majority of its operations overseas, the SEC’s complaint quotes an executive as allegedly telling a compliance officer that the company was “[f—ing] Unlicensed securities exchange in the US, bro.”

In a blog post, Binance said it was “disappointed” with the SEC’s lawsuit and had “engaged in extensive good faith discussions to reach a negotiated settlement to resolve its investigations.”

Other people named in the SEC lawsuit also spoke out after the indictments were revealed this week.

The Cardano Foundation, which is working to advance the use of its eponymous technology, said in a tweet that it disagrees with its ADA coin being labeled as collateral and “we look forward to continuing to work with regulators and policymakers to.” to achieve legal clarity and certainty.” on these issues.”

Filecoin’s developer, Protocol Labs, said in a series of tweets Thursday that the token is critical to the operation of its distributed storage network. This is how people buy storage from vendors, and according to Protocol, the cost is much less than what users would pay Amazon web services or Google Cloud.

“Filecoin is a cryptocurrency-based global storage network that preserves humanity’s most vital information, not a security,” Protocol Labs tweeted.

In its 101-page complaint against Coinbase, the SEC clarified that regardless of whether these tokens have some utility, they can be easily purchased through the app by people with no interest beyond investing. And Coinbase generates revenue by executing these trades.

“Coinbase makes these crypto assets available for trading,” the SEC said, “without limiting transactions to those who might acquire the asset or treat it as something other than an investment.”

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