Crypto Tokens Fall On Concern Gensler Extends to SEC Crackdown

by The Insights

U.S. Securities and Exchange Commission Chairman Gary Gensler takes a seat before the start of the Senate Banking, Housing, and Urban Affairs Committee hearing on oversight of the U.S. Securities and Exchange Commission on Tuesday, September 14, 2021.

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

SEC Chairman Gary Gensler stepped up his attack on the crypto industry this week, continuing Coinbase and Binance for violating securities and questioning the future of token trading.

Crypto investors got the hint. Four of the 10 most valuable coins have fallen at least 15% this week, according to CoinMarketCap, a selloff sparked by the lawsuits and Gensler’s interview with CNBC on Tuesday, in which he said “we don’t need to more digital currency.”

Alleging that Coinbase was acting as an unregistered broker and exchange, the SEC said that at least 13 crypto assets available to the company’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 (FIL) token.

Trading app Robin Hood followed up on Friday by announcing that starting June 27, it will no longer support trading Cardano, Polygon, and Solana coins. The company said “no other parts are affected.” Also on Friday, announced that it would shut down its US institutional exchange.

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

The Cardano coin, the seventh most valuable cryptocurrency, according to CoinMarketCap, fell 20% last week. Solana, ranked ninth, fell 18%. Polygon, ranked 10th, also slipped 18%. Filecoin, which is further down the list, fell 19%. Binance’s fourth-ranked BNB token fell 16%.

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

Gensler, who was named head of the SEC by President Biden in 2021, has spent much of the past year suing crypto companies and exchanges for effectively selling highly speculative and risky securities disguised as other thing.

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 fake marketing, Gensler has made the crypto industry once in booming its main drawdown target.

“The investing public benefits from US securities laws,” Gensler said in an interview with CNBC’s “Squawk on the Street” on Tuesday. “Crypto should be no different, and these platforms, these intermediaries need to come into compliance.”

Gensler’s TV appearance came after the SEC sued Coinbase and said the company should be “permanently restrained and prevented” from “operating its crypto asset trading platform as a national stock exchange, broker and unregistered clearing agency”.

Shares of Coinbase, the only major publicly traded crypto exchange in the United States, have fallen 18% this week. Coinbase chief legal officer Paul Grewal told CNBC in a statement that the SEC’s approach to enforcement without laying out clear rules “harms America’s economic competitiveness and hurts companies like Coinbase who have demonstrated their commitment to compliance”.

A day earlier, in its lawsuit against Binance, the SEC alleged that the company and founder Changpeng Zhao mixed billions of dollars in 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 complaint cites a senior executive who allegedly told a compliance officer that the company operated like a “[f—ing] unlicensed stock exchange in the United States, my brother.”

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

Other people named in the SEC lawsuit also weighed in after the charges this week.

The Cardano Foundation, which strives to advance the use of its namesake technology, said in a tweet that it disagrees with the labeling of its ADA coin as security and “we await looking forward to continued engagement with regulators and policymakers to achieve legal clarity and certainty on these issues.”

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. This is how people buy storage from vendors, and Protocol says the cost is far less than what users would pay Amazon Web services or Google Cloud.

“Filecoin is a cryptocurrency-powered global storage network preserving humanity’s most important information, not security,” Protocol Labs tweeted.

In its 101-page complaint against Coinbase, the SEC made it clear that whether or not these tokens have some level of utility, they can easily be purchased on the app by people who have no interest beyond that. investment. And Coinbase generates revenue by executing these transactions.

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

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