✌️ 2 Reasons Why The SEC Sued Binance & Coinbase
AND the 10+ tokens labelled as "unregistered securities"
Gm, it’s Friday ya’ll. You know what that means! No checking your calendar every half an hour, unless you’re one of those hyper-productive freaks who “pencils everything in.”
You do you, my friend. 💪
Welcome to the new subscribers who have joined us this week. Every week, we break down the coolest crypto stories of the week. Oh! And every month we give you a deep dive on a hot topic. The latest topic – Why VCs are switching up Crypto for AI!
Sometimes people just don’t like you. And there’s nothing you can do about it.
It’s not that you said something to them.
It’s not that you did something to them.
It’s not like you accidently threw their favourite baseball card in the trash during sixth grade because it stuck to the back of your food tray. Sorry Zach!
If someone just doesn’t like you, you gotta deal with it. That’s what two of the largest crypto exchanges in the world are going through right now.
The biggest financial regulator in the United States 🇺🇸 – the Securities and Exchange Commission (SEC) just sued – Coinbase and Binance. In this crossfire, over 10 tokens were labelled as “securities.” Many of these for the first time.
But the allegations against Coinbase and Binance are not the same. One exchange is accused of a lot more than offering trading in “unregistered securities.” You can probably guess which one. 😉
Beyond the bad news, there’s also (some) good news. We wrote, earlier this week, about the reason VCs are moving from crypto → AI. Yet, some stayled. Some of them are investing heavily in this particular crypto sector. And it starts with S _ _ _ _ _.
Alright, let’s get into it:
🤡 SEC’s 2 strikes: 2 reasons Coinbase AND Binance were sued
💰 $17 million raised: Why this niche will dominate Web3
📈 Crypto the next internet?: Active addresses think so
🍸 Martini in Bali: But only if you’re a crypto criminal
🤡 The SEC sues the top-2 crypto exchanges
The number of lawsuits filed this week against crypto exchanges by the Securities and Exchange Commission (SEC) this past week.
Binance – the largest exchange in the world
Coinbase – the largest American exchange
🤝 Against Coinbase and Binance
the exchanges operate as an exchange, broker, and clearing agency without registering as such
failing to register its staking platform, and hence offering services for “unregistered securities.”
🟡 Against (only) Binance:
offering unregistered sales of – Binance’s native coin (BNB), Binance’s stablecoin issued with Paxos (BUSD)
operating unregistered crypto lending products
wilfully evading US federal securities laws by claiming that Binance’s US subsidiary (BAM Trading) operated independently and did not serve US customers
misleading customers on manipulative trading on Binance' US
engaging in – undisclosed market making, and wash trading
Caught in the crossfire are cryptocurrencies that were not thought of to be securities until the SEC specifically called them as securities. They include:
CHZ – native token of Chillz
SOL – native token of Solana
DASH – native token of Dash
NEXO – native token of Nexo
FIL – native token of Filecoin
VGX – native token of Voyager
ADA – native token of Cardano
ATM – native token of Cosmos
ALGO – native token of Algorand
MATIC – native token of Polygon
AXS – native token of Axie Infinity
SAND – native token of The Sandbox
MANA – native token of Decentraland
NEAR – native token of NEAR Protocol
ICP – native token of Internet Computer
FLOW – native token of Flow Blockchain
Once this new dropped everyone (and I mean everyone) reacted to it in their own way. Let’s look at the top-3 best picks.
Coinbase didn’t do a Robinhood. Well, not entirely. 😆
First – they informed users that their funds were safe.
Second – Brian Armstrong, the CEO, said Coinbase staking would not be shut down despite being labeled a service offering “unregistered securities” trading.
Third – Brian Armstrong called the SEC chairman, Gary Gensler, and…er…“outlier.”
Yes, that’s the word you should use if you’re the face of a publicly listed company that’s constantly the target of the largest financial regulator in the country. O U T L I E R.
Binance went straight for the jugular. 😯
First – Binance US was forced to halt trading in US dollars because its banking partners in the US refused to support USD trades because of the SEC’s lawsuit.
Second – Binance’s law firms stated that Gary Gensler offered to become an “informal advisor” to the crypto exchange in March 2019. Gensler, who was teaching a course on blockchain at MIT’s Sloan School of Management back then, even met with Zhao in Japan.
The funny thing is, when Gensler testified in front of the Financial Services Committee four months later he said:
Robinhood tried to throw shade at the SEC, but couldn’t. 🥲
The largest brokerage in the US also offers crypto trading. But it decreased its crypto offerings by 30%, delisting 3 tokens labeled as “securities” by the SEC.
(Robinhood still supports – BTC, ETH, DOGE, LETC, BCH, ETC, and BSV, yes BSV!!)
But Robinhood wasn’t mum 🤫 about the SEC’s policies on registering platforms offering crypto trading.
Robinhood’s chief compliance layer (and a former SEC commissioner) said the brokerage went through a 16-month process with the SEC to register as a “special purpose broker-dealer for digital assets” but was turned down. This is similar to the experience of Coinbase, Gemini, and other crypto companies in the US.
We’re not here to draw judgment on – SEC vs Binance, SEC vs Coinbase, SEC vs 10+ cryptocurrencies, SEC vs _____*insert next crypto target here*___.
But what do you think?
🪄 FUNDING ALERT: Social media leader raises $17 million
It’s not seen as something that can be helped by web3 technology. But it is.
Over the past year, social media platforms built on public blockchain protocols have been springing up. And one of the most popular ones raised $15 million this week.
Lens Protocol, a decentralized social media protocol that allows creators to – create and own their social media presence (audience, content, and data), raised $15 million from some prominent investors.
The funds in this round included – IDEO CoLab Ventures, Blockchain Capital, General Catalyst, and Palm Tree. Also joining in were some popular angel investors in the crypto space:
Sandeep Nailwal, co-founder of Polygon
Balaji Srinivasan, ex-CTO of Coinbase
Hayden Adams, CEO of Uniswap
Lens is not a social media application, it’s a protocol. On it, various social media applications, and content management systems, (decentralized albeit) can be built. And Lens is by far the most popular of the decentralized social (or DeSo) protocols:
📈 Chart of the week: Active addresses reach a new peak
The year was 1996 when internet users crossed 20 million in number. That was way less than 1% of the population.
Now, less than 3 decades later, over 5.5 billion people, or ~70% of the world’s population, use the internet.
Can the same happen to crypto?
We’re not sure about that. But active on-chain addresses are growing.
As of writing, there are ~20 million active addresses across blockchains in the world. This is a 4x increase in the past 5 years despite not 1 but 2 crypto bear markets.
What do you think the active on-chain addresses will be in 2030?
(We’ll share the results in next week’s newsletter!)
🤣 Meme Of The Week
What else we Grittin’ On?
🥬 ROB. Robinhood removes – SOL, ADA, and MATIC – for trading on its app after the US SEC labeled these coins as “securities.”
🇬🇧 UK2K. Crypto owners in the United Kingdom doubled in 2022 according to a survey by the Financial Conduct Authority (FCA).
🍸 3AC. The New York Times details the lavish lives of bankrupt and shamed crypto hedge fund founders Three Arrows Capital.
🇦🇺 AUSSIE. Australia’s Commonwealth Bank of Australia (CBA) blocks payments to crypto exchanges as part of new anti-scam measures.