The emergence of a new wave of repression from the SEC has sparked heated discussions on whether certain cryptocurrencies should be considered securities.
The lawsuits filed by the SEC against two leading cryptocurrency exchanges in the crypto industry have raised serious concerns within the cryptocurrency community. The increased attention from regulatory bodies signifies a notable shift in authorities and has reignited discussions on how to classify certain cryptocurrencies as securities.
Contents:
- SEC files lawsuit against Binance and Coinbase
- Howey Test in the cryptocurrency sphere
- SEC files lawsuits against cryptocurrencies deemed securities
- There is another, longer list
- Crucial stage in cryptocurrency regulation
SEC files lawsuit against Binance and Coinbase
Last week, Binance, a well-known cryptocurrency exchange and a major player in the global market, along with its founder Changpeng Zhao, faced accusations of non-compliance with certain regulatory requirements. The U.S. Securities and Exchange Commission (SEC) took unprecedented actions against this leading cryptocurrency exchange, accusing it of 13 violations of federal securities laws.
The next day, the SEC entered into legal proceedings with the main competitors, Binance and Coinbase. The regulator stated that Coinbase was never registered as a broker or securities exchange. According to the SEC, the key services offered by Coinbase, such as prime brokerage activities, exchange trading, and staking programs, violate securities regulation rules.
The crypto industry has seen extensive debates and discussions following two lawsuits filed against Binance and Coinbase. Many industry participants have started speculating whether regulators intend to eliminate these exchanges, thereby paving the way for Wall Street's dominance. There is significant concern regarding compliance with regulatory requirements in the cryptocurrency market.
Howey Test in the cryptocurrency sphere
The SEC's lawsuit is based on the application of the Howey Test, which is an outdated legal framework developed in 1946. This test takes its name from the landmark court case SEC v. W.J. Howey Company and is used to determine whether an asset can be classified as a "security."
Its composition includes four main criteria:
- The possibility of investing funds is being discussed.
- The investor plans to contribute money with the hope of making a profit.
- The option of investing in a joint venture is being discussed.
- The investor's expected profit depends on the activities of other participants.
The SEC claims that 19 cryptocurrency tokens available for trading on Binance and Coinbase exchanges meet the criteria set in the Howey Test. This can be attributed to several factors, including successful presale sales and fundraising campaigns, consistent promises of project development, and active use of social media to showcase the unique features and advantages of these protocols.
The application of this test, developed long before the emergence of cryptocurrencies, is not optimal for use in relation to digital assets, according to critics. This can lead to overly stringent regulatory outcomes that do not take into account the specific and unique characteristics of cryptocurrencies.
SEC files lawsuits against cryptocurrencies deemed securities
In the lawsuits against the SEC, which mention Binance and Coinbase, 19 cryptocurrencies have been identified as securities.Here is the full list of those tokens.
Below is a table of cryptocurrencies listed along with their status in the SEC lawsuits against Binance and Coinbase:
| SEC Lawsuit against Binance | SEC Lawsuit against Coinbase |
| Cosmos (ATOM) | Chiliz (CHZ) |
| Binance Coin (BNB) | Near (NEAR) |
| Binance USD (BUSD) | Flow (FLOW) |
| COTI (COTI) | Internet Computer (ICP) |
| Voyager Token (VGX) | |
| Dash (DASH) | |
| Nexo (NEXO) |
Finally, the following tokens, traded on both the Binance and Coinbase platforms, have also been designated as securities:
- Solana (SOL)
- Cardano (ADA)
- Polygon (MATIC)
- Filecoin (FIL)
- The Sandbox (SAND)
- Decentraland (MANA)
- Algorand (ALGO)
- Axie Infinity (AXS)
A notable difference is that Ethereum (ETH) has been excluded from the list of sanctions.
If the presented tokens are ultimately recognized as securities, they are likely to be delisted from American exchanges, and trading of them will be restricted. Such a development could set a worrisome precedent and create significant regulatory challenges in the cryptocurrency industry, especially for developers and owners of these tokens.
There is another, longer list
However, in addition to the accusations against Binance and Coinbase, the "blacklist" compiled by the SEC based on the Howey Test includes other cryptocurrencies as well. The criteria used by the regulator determine that a total of 67 different cryptocurrencies could be considered securities, subject to special rules and requirements. This accounts for approximately 10% of the total market capitalization.
The following cryptocurrencies, previously mentioned by the SEC, include:
- Ripple (XRP)
- Telegram’s Gram (TON)
- LBRY Credits (LBC)
- OmiseGo (OMG)
- DASH (DASH)
- Algorand (ALGO)
- Naga (NGC)
- Monolith (TKN)
- IHT Real Estate (IHT)
- Power Ledger (POWR)
- Kromatica (KROM)
- DFX Finance (DFX)
- Amp (AMP)
- Rally (RLY)
- Rari Governance Token (RGT)
- DerivaDAO (DDX)
- XYO Network (XYO)
- Liechtenstein Cryptoasset Exchange (LCX)
- Kin (KIN)
- Salt Lending (SALT)
- Beaxy Token (BXY)
- DragonChain (DRGN)
- Tron (TRX)
- BitTorrent (BTT)
- Terra USD (UST)
- Luna (LUNA)
- Mirror Protocol (MIR)
- Mango (MNGO)
- Ducat (DUCAT)
- Locke (LOCKE)
- EthereumMax (EMAX)
- Hydro (HYDRO)
- BitConnect (BCC)
- Meta 1 Coin (META1)
- Filecoin (FIL)
- Binance Coin (BNB)
- Binance USD (BUSD)
- Solana ((SOL)
- Cardano (ADA)
- Polygon (MATIC)
- Cosmos (ATOM)
- The Sandbox (SAND)
- Decentraland (MANA)
- Axie Infinity (AXS)
- COTI (COTI)
- Paragon (PRG)
- AirToken (AIR)
- Chiliz (CHZ)
- Flow (FLOW)
- Internet Computer (ICP)
- Near (NEAR)
- Voyager Token (VGX)
- Nexo (NEXO)
- Mirrored Apple Inc. (mAAPL)
- Mirrored Amazon.com, Inc. (mAMZN)
- Mirrored Alibaba Group Holding Limited (mBABA)
- Mirrored Alphabet Inc. (mGOOGL)
- Mirrored Microsoft Corporation (mMSFT)
- Mirrored Netflix, Inc. (mNFLX)
- Mirrored Tesla, Inc. (mTSLA)
- Mirrored Twitter Inc. (mTWTR)
- Mirrored iShares Gold Trust (mIAU)
- Mirrored Invesco QQQ Trust (mQQQ)
- Mirrored iShares Silver Trust (mSLV)
- Mirrored United States Oil Fund, LP (mUSO),
- Mirrored ProShares VIX Short-Term Futures ETF (mVIXY)
Chairman of the SEC Gary Gensler has expressed the possibility of expanding the agency's jurisdiction to cover all cryptocurrencies except Bitcoin, considering them as potential securities. However, this viewpoint has sparked disagreements, and the demand for clarity in regulation is becoming increasingly urgent.
Crucial stage in cryptocurrency regulation
Lawsuits filed against Binance and Coinbase represent a significant milestone for the cryptocurrency industry. The development of these cases could lead to the emergence of new precedents and the shaping of future legislation.
In light of extensive legal proceedings, there is an urgent need for the creation of a modern and comprehensive regulatory framework, which sounds louder than ever before. Due to the rapid development of the industry, the laws governing it must also be updated to avoid limiting innovation and ensure the protection of investors' interests.
This stage in the history of cryptocurrencies highlights the significant importance of collaboration between the legal and technological spheres, which lays the foundation for the future development of this industry.
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