Weekly Updates

Caddi Weekly Update - June 8th

SEC Fires at Crypto Giants Binance and Coinbase: A Shift in Regulatory Landscape? Crypto Big Boys Bounce Back Post Record Liquidations Amid Regulatory Challenges. ARK Stands Strong with Coinbase Amid SEC Lawsuit.
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SEC v Binance & Coinbase

The U.S. Securities and Exchange Commission (SEC) has launched enforcement actions against two major cryptocurrency platforms, Binance and Coinbase, leading to a potentially decisive legal standoff regarding cryptocurrency regulations. The SEC accuses these companies of operating unregistered exchanges and offering unregistered securities, including Binance’s own digital assets: BNB and the Binance USD (BUSD) stablecoin. Binance is further accused of intentional deception to evade U.S. oversight, allegations that have not been made against Coinbase.

The SEC’s actions establish a comprehensive legal stance against the crypto industry and could shape its future regulatory landscape. The companies have vowed to defend their businesses, with Coinbase's Chief Legal Officer Paul Grewal urging for clear rules for the digital asset industry. Notably, the SEC has also requested court intervention to restrain Binance's activities on an emergency basis, marking an escalated approach to enforcement. This piece by Jesse Hamilton for CoinDesk brings in voices from experts such as Terrence Yang, a former Wall Street lawyer, Gustavo Schwenkler, a Santa Clara University business school professor, and Joshua Ashley Klayman, the U.S. head of digital assets at Linklaters LLP​1​.

The Markets Love Drama

Crypto markets exhibited signs of bullish strength on Wednesday, bouncing back from Monday's record liquidation event, which saw over $293 million worth of token-tracked futures products liquidated. Leading the recovery were Bitcoin (BTC) and Dogecoin (DOGE), which rose by 5%, while Litecoin (LTC), XRP, and Shiba Inu (SHIB) jumped as much as 4%, contributing to a 3.3% increase in total crypto market capitalization, now standing at $1.12 trillion​1​.

This recovery comes despite the recent regulatory challenges faced by major crypto exchanges Binance and Coinbase, which have been charged by the U.S. Securities and Exchange Commission (SEC) for selling unlicensed securities. Despite the lack of clear definitions by the SEC on whether crypto tokens can be considered securities, the market's rebound hints at resilience in the face of regulatory uncertainties​1​.

Jeff Mei, COO of crypto exchange BTSE, noted that while Bitcoin and Ether weren't explicitly termed as securities by the SEC, the majority of altcoins could face continued uncertainty, leading to a potential bifurcation of crypto markets​1​.

Ark Invest Is Buying The Dip

On the day the Securities and Exchange Commission (SEC) served cryptocurrency exchange Coinbase with a lawsuit, ARK Invest purchased over 400,000 shares of Coinbase stock, representing an investment of over $21 million​1​. The acquisition occurred as Coinbase's stock plummeted by more than 20%, following the SEC lawsuit and its ongoing implications​1​. This isn't the first time ARK Invest has shown support for Coinbase; just a month prior, it added an additional 168,869 shares, valued at around $8.5 million, to its portfolio. The firm also made substantial investments in Coinbase in March and April​1​.

The lawsuit accuses Coinbase of offering unregistered securities without the necessary registrations. In response, Coinbase CEO Brian Armstrong expressed confidence in their position and welcomed the opportunity for clarification of crypto rules in court​1​. Coinbase's Chief Legal Officer, Paul Grewal, stated that the company has always embraced regulation and met with the SEC 30 times in 2022 for guidance​1​. Meanwhile, a Show Cause Order was issued against Coinbase by state security regulators, alleging violations of securities law by its staking rewards program​1​.

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