For the SEC, many of the largest cap altcoins in the crypto market are financial securities.
Many altcoins would be financial securities.
According to the US regulator, many altcoins are financial securities. In a complaint filed against Binance and today against Coinbase, the SEC points to different crypto-currencies considered "securities", a financial title in French.
To be considered as such, an asset must meet four criteria according to the Howey test :
- an investment of money,
- a joint venture,
- an expectation of profit,
- benefits from the efforts of others
However, this last criterion often poses a problem and does not correspond to crypto-currencies.
Yesterday, Binance, its US entity and its CEO, CZ, were charged with 13 counts, including violation of federal securities law. In this complaint, the SEC claims that Solana, Polygon or Cardano are financial securities.
Big caps in the crypto market are taking the hit.
Almost all of the cryptos targeted by the regulator are among the largest in the crypto market, with multi-billion dollar market capitalizations.
The cryptos in question are Binance's BNB, BUSD, and ten other tokens: Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS) and COTI (COTI).
Following this new attack from the SEC, the market and these altcoins, particularly, have unscrewed. Solana is down more than 7.3% over the past 24 hours.
The BNB experienced a dump of more than 6.8% over the same period. It's even worse for Algorand, which fell more than 8.15% in 24 hours.
The SEC is in working order.
The SEC notably accuses Binance and BAM Trading, the operator of Binance.US, which Binance has declared to be a separate company, of having operated as exchanges without registering with the regulatory authority and being securities brokers and clearing agencies.
The lawsuit details:
"Binance and BAM Trading illegally engaged in unregistered offers and sales of securities of crypto assets. In doing so, they deprived investors of important information, including risks and trends that affect the company and an investment in these securities."
In the lawsuit against Coinbase, the SEC also accuses the exchange of selling unregistered financial securities.
The classification of cryptocurrencies is the central topic when it comes to regulation. For the SEC, many tokens are financial securities even though they do not tick all the boxes of the Howey test.
For years, players in the crypto industry, in particular Coinbase, have been calling for a clarification of the regulatory framework without success so far...
The SEC Takes on Coinbase a Day After Binance: the market sees red.
The American regulator is on all fronts. One day after launching a lawsuit against Binance and its CEO, it's Coinbase's turn to be targeted by the SEC!
Coinbase sued like Binance
Coinbase is suing by the SEC for alleged federal securities law violations. This lawsuit comes less than 24 hours after the one against Binance, another crypto exchange giant.
The SEC blames Coinbase, particularly, for having operated as an unregistered broker, exchange and clearing agency. The regulator believes that the US exchange solicited clients, processed orders, authorized offers and acted as an intermediary simultaneously.
Unlike Binance, only Coinbase and Coinbase Global being affect by the complaint. The company's CEO, Brian Armstrong, is not the target of these lawsuits.
Diverse functions?
Once again, the American regulatory authority criticizes the exchange for selling financial securities (securities) without being registered with the Commission. The SEC complaint details:
"The Coinbase platform merges three functions usually separated in traditional securities markets: brokers, exchanges and clearing agencies. Yet Coinbase has never registered with the SEC as a broker-dealer, national securities exchange, or clearing agency, evading the disclosure regime that Congress established for our securities markets."
In a press release issued on Tuesday, Commission Chairman Gary Gensler states that these functions were mixed at Coinbase. He states:
"Coinbase's alleged breaches deprive investors of essential protections, including rules that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC."
Several assets recognized as financial securities?
The SEC points to Coinbase's staking, Wallet and Prime products. Following this new attack in order, the crypto market unscrewed, and the price of Bitcoin fell below the 26,000 dollar mark, down more than 4% over the day. For its part, the action Coinbase news, listed on NASDAQ, also tumbled in pre-market.
The SEC also states that Coinbase listed certain cryptos, knowing they were financial securities. Thus, the lawsuit details:
In other words, to achieve exponential growth of the Coinbase platform and increase its profits, Coinbase decided to add crypto-assets to the Coinbase platform, even though it recognized that crypto-assets had the characteristics of titles.
In its complaint, the SEC identified Solana (SOL), Cardano (ADA), Polygon (MATIC), Sandbox (SAND), Filecoin (FIL), Axie Infinity (AXS), Chiliz (CHZ), flow (FLOW), Internet computer (ICP), near (NEAR), Voyager (VGX), Dash (DASH) and Nexo (NEXO) as securities.
Coinbase had already received an adequate notice last April. The latter foreshadowed possible legal action by the SEC. This did not fail, and observing how the exchange intends to defend itself and counter-attack will be interesting!