In a massive blow to the crypto industry, the US Securities and Exchange Commission (SEC) sued two of the most prominent cryptocurrency exchanges, Binance and Coinbase (COIN), this week.
“The whole business model is built on a noncompliance with the US securities laws, and we're asking them to come into compliance,” SEC Chair Gary Gensler said in an interview on CNBC.
The SEC accused both platforms of operating unregistered exchanges and offering the sale of unregistered securities, including Binance's own exchange token, BNB, and stablecoin BUSD. In response, Binance.US has announced the removal of select trading pairs that will impact certain BTC, USDT, and BUSD advanced trading pairs as well as pause its Over The Counter (OTC) Trading Portal.
Meanwhile, the regulator detailed “a non-exhaustive list” of more than a dozen cryptocurrencies in its lawsuit against Coinbase, covering Cardano (ADA), Polygon (MATIC), Solana (SOL), Near (NEAR), Internet Computer (ICP), Sandbox (SAND), Axie Infinity (AXS), Flow (FLOW), Filecoin (FIL), Nexo (NEXO), Chiliz (CHZ), Dash (DASH), and Voyager (VGX) as securities that should have been registered.
While the agency accused Binance and its CEO Changpeng Zhao of operating a “web of deception” and charged both with 13 offenses, its lawsuit against Coinbase alleges that the exchange has been operating as a middleman but didn't follow the disclosure requirements meant to protect investors.
“The two cases are different, but overlap and point in the same direction: the SEC's increasingly aggressive campaign to bring cryptocurrencies under the jurisdiction of the federal securities laws,” said the former federal prosecutor Kevin O'Brien, who's a partner at Ford O'Brien Landy, adding, “if the SEC prevails in either case, the cryptocurrency industry will be transformed.”
The SEC accused Binance of failing to restrict US customers from its platform, inflating trading volumes, diverting customer funds, improperly commingling assets, and misleading customers about its controls. The SEC has also filed a motion to freeze assets belonging to Binance.US and its affiliates.
Binance has pledged to “vigorously” defend itself against the lawsuit, which according to the exchange, reflects the SEC's “misguided and conscious refusal” to provide clarity to the crypto industry. Coinbase's general counsel, Paul Grewal, meanwhile said in a statement that the company will continue to operate as usual and has “demonstrated commitment to compliance.”
In the aftermath of the regulatory crackdown, the crypto market had a volatile week. As of writing, Bitcoin is trading at $26,430 and Ether at $1,845, while the total market cap stands at $1.147 trillion.
Meanwhile, the SEC's list of digital tokens deemed unregistered securities spans more than $100 billion of crypto. But how are they performing ever since the regulator's charges became public? Let's take a look!
Binance Coin (BNB)
The 4th largest cryptocurrency, with a market cap of $40.8 billion, is down 5.7% in the past 24 hours while managing $1.6 billion in trading volume.
At the time of writing, BNB has been trading at $261.37, down from almost $306 at the beginning of this week. With these losses, BNB's year-to-date (YTD) gains are left at just 6.28%, down almost 62% from its all-time high of $686.
Binance Coin is the native token of the world's largest cryptocurrency exchange Binance. Originally launched on the Ethereum blockchain, BNB was later migrated to Binance's own smart chain called BNB Chain.
BNB can be used to pay for trading fees on the exchange, usually at a discounted rate. BNB is also used to pay for fees on the BNB Chain and is also needed to trade on the Binance DEX. The token is designed with a burning mechanism to induce scarcity and support the price of the token.
With a market cap of $11.46 billion, ADA holds an eighth position in the list of largest cryptocurrencies by market cap. However, it is only down 4% today, trading at $0.3269 while recording $423 million in 24-hour trading volume.
The coin has lost 14.4% of its value this week and 89.4% since hitting an ATH of $3.09. Despite that, ADA's price is up 30.39% YTD.
ADA is the native cryptocurrency of Cardano, a smart-contract platform that aims to provide multiple features through layered design. The token is used to pay for transactions and gives stakers a claim on new issuance in proportion to their holdings.
Three separate entities oversee the development of Cardano: IOG Input Output Global (IOG), Cardano Foundation, and Emurgo. In response to regulatory action concerning the legal status of the ADA, IOG said the filings contain “numerous factual inaccuracies,” and ADA has never been a security under US law.
IOG also said it is open to working with regulators to create pro-innovation frameworks that “honors…the nature of blockchain.”
With a market cap of $7.44 billion, SOL stands at the 10th spot in the overall crypto space. The token is currently exchanging hands at $18.64, down 6.7% on Thursday while recording $464 million in 24-hour volume.
Since Monday, SOL has lost 16% of its value but is still up 85.59% in 2023, though down a whopping 92.8% from its $260 peak.
SOL can't seem to catch a break. Besides having several outages, last year, its staunch supporter Sam Bankman-Fried (SBF) was found to be misusing customer funds, and his crypto exchange FTX went bankrupt.
SOL is the native crypto of the Solana blockchain, a layer-1 blockchain that optimizes for scalability and has fast transaction times and inexpensive fees. Besides using the PoS consensus algorithm to secure the network, Solana also uses a new timestamp system called Proof-of-History (PoH) to enable automatically ordered transactions.
Trading at $0.775, MATIC price is only down by 2% in the past 24 hours while recording $344 million in volume during the same period but has declined 14.3% this week.
The $7.2 billion market cap crypto is the 11th largest crypto which is only up by a mere 0.5% in 2023 while being down 73.45% from its ATH.
MATIC is the native cryptocurrency of the Polygon Network, a layer 2 platform that allows developers to create and deploy their own blockchains that are compatible with the Ethereum blockchain. Polygon rebranded from Matic Network in Feb. 2021 and pivoted towards supporting multiple Layer-2 infrastructure.
This Ethereum scaling solution has a modular, flexible framework that allows developers to build and connect Layer-2 infrastructures like Plasma, Optimistic Rollups, zkRollups, and standalone sidechains.
The 23rd largest cryptocurrency, ATOM, with a market cap of $2.78 billion, has dropped 4% to now trade at $9.52, down from $10.84 on Monday. 2023 hasn't really been good for ATOM's price, which is down by 0.08% YTD and 78.57% from its $4.45 peak.
ATOM is the native token of the decentralized network Cosmos that provides open-source tools for developers to create their own interoperable blockchains. It is used as a staking token, spam-prevention mechanism, and for governance.
With the crypto space flooded with blockchains, very few can transfer data between one another. That's where Cosmos comes into the picture, as it seeks to become the “internet for blockchains” by allowing them to freely share data and tokens across all the blockchains in the Cosmos ecosystem.
Blockchains in the Cosmos ecosystem communicate via IBC, an interoperability protocol. The Cosmos Hub is secured by the Byzantine Fault-Tolerant (BFT) PoS consensus algorithm, Tendermint.
The Sandbox (SAND)
This popular metaverse token is the 48th largest crypto with a market cap of almost $900 million. Down 5.8% in the past 24 hours, the price of SAND is currently at $0.48 while recording $124 million in volume.
SAND has actually been hit the hardest this week, having declined 21.5% since Monday but is still up 23.67% in 2023 though down a whopping 94.24% since its peak.
Sabastien Borget, co-founder and Chief Operating Officer of The Sandbox said while the token has been named in the lawsuit, the team is “not ourselves directly subject to litigation,” and it “doesn't change” their business on a day-to-day basis.
“We do not necessarily agree with the characterization that's been put in that litigation, including the qualification of SAND as a security there,” he said.
SAND is the utility token of The Sandbox, a popular virtual world where players can build, own, and monetize their gaming experiences using NFTs and SAND tokens.
The $758 million market cap token is down 5.8%, recording $83 million in trading volume in the past 24 hours. At the time of writing, MANA was exchanging hands at $0.4157, down from $0.530 earlier this week. With these latest losses, MANA's price is now down 93% from its $5.85 ATH but still up 35.85% YTD.
MANA is the native token of Decentraland, a decentralized, blockchain-based virtual world where users can create, experience, and monetize content and apps.
The token plays a central role in the Decentraland world, as players can buy and sell a range of in-game items using MANA. Holders can also convert their MANA into wrapped MANA (wMANA) and deposit it into a DAO to vote on the project's future development.
The token is also used to purchase non-fungible digital asset LAND, which are 16m x 16m parcels and represents a single plot of land in Decentraland.
Axie Infinity (AXS)
Once a popular token, AXS has come a long way since the 2021 bull market, as evident from its 96.24% drawdown from its $165 ATH.
Currently, AXS is trading at $6.22 in red by 4.7% on Thursday and by 16.5% since Monday. AXS is even down by 2.89% this year but still up a staggering 4,911% since its all-time low of $0.124 in Nov. 2020.
Axie Infinity Shards (AXS) is the governance token of Axie Infinity, a Pokemon-inspired “play-to-earn” pet training game, and virtual world built on the Ethereum blockchain. The platform is built by Vietnam-based company Sky Mavis.
In the game, players can collect, breed, battle, and trade in-game pets called Axies. All in-game assets are represented via fungible ERC-20 or non-fungible ERC-721 tokens and traded on secondary markets.
This week, CHZ's price took a tumble of 14.6%, which has its YTD performance now at negative 15.18%. Trading at $0.08769, the digital currency for sports and entertainment has lost 90% of its value since its $0.8786 peak.
CHZ is a $469.2 million market cap cryptocurrency, which is the native token of the Chiliz blockchain that powers the fan engagement and rewards platform Socios.com.
Fans can purchase and trade branded Fan Tokens on the Chiliz sports exchange while having the ability to participate, influence, and vote on decisions for their favorite teams. Holders can also gain access to exclusive platforms and can receive rewards from their teams.
The fan token platform operates a secondary blockchain connected to the Chiliz network. Sports teams can even elect to have their own sidechain set up and customize the amount of fan tokens they want to launch. Those who offer fan tokens receive revenue from transaction fees on the Chiliz network.
This one is also in the red by 6.21% in 2023 so far while trading at $0.627, down 4.7% in the past 24 hours and nearly 15% this week. Out of all the coins here, FLOW is down an astounding 98.5% from its peak of $42.4.
FLOW is the native token of the Flow blockchain, a network for NFTs created by Dapper Labs. The blockchain uses a multi-role architecture design to scale the network and improve its speed and throughput while preserving composability standards and a developer-friendly, ACID-compliant environment.
Internet Computer (ICP)
ICP token is down the most, 99.4%, out of all the coins on this list from its ATH above $700. Currently exchanging hands at $4.17, ICP is in the red by 4% in the past 24 hours while managing $24.46 million during this period. The $1.8 billion market cap coin is down 14% this week and is only up 3.33% YTD.
ICP is the native cryptocurrency of Internet Protocol, a blockchain network built by the DFINITY Foundation. The platform allows developers to deploy and run applications using canisters, which are similar to smart contracts, and each has a storage capacity of 4GB.
Besides the governance token ICP, Internet Computer also has another token, Cycles, which are created by “burning” ICP. This one is used to pay for computational resources on the platform.
Near Protocol (NEAR)
Down more than 4% in the past 24 hours and 14% this week, NEAR is currently exchanging hands at $1.42. This $1.3 billion market cap cryptocurrency is up 9.58% YTD but still down 93% from its all-time high of $20.44.
NEAR is the native token of the Near Protocol, a smart contract blockchain that is designed to be cheaper and faster than Ethereum. It uses the PoS consensus mechanism and will eventually feature a sharded architecture dubbed Nightshade to scale transaction throughput. Being a governance token means holders can vote on the platform's future.
Yet another token that fell down more than 98% from its peak of almost $237 is FIL which took a tumble of 4.3% in tandem with the broad crypto market as the SEC sued the two most popular crypto exchanges.
As of writing, FIL is trading at $4.12, down from $4.73 at the beginning of the week and $5 over the weekend. FIL's YTD gains still stand at 32.8%.
FIL is the native digital token of Filecoin, a peer-to-peer, decentralized network for file storage built by Protocol Labs and acts as the incentive and security layer for IPFS (InterPlanetary File System). The platform allows users to sell their excess storage on an open platform. The token is offered as an economic incentive to ensure the reliability of file storage as well as for community participation on the network.
On Monday, NEXO was trading at just above $0.665 and, since then, has fallen to $0.6469. However, the losses in NEXO price have been ongoing, as evident from its negative 4.81% price performance in 2023 so far and over 84% from the $4 peak. However, the $358 million token's losses over the past 24 hours have been the lowest at a mere 0.8% while registering $4.5 million in volume.
NEXO is the native token of the crypto lending platform Nexo which offers crypto-backed lines of credit and interest-bearing crypto accounts. It serves as a centralized alternative to decentralized lending platforms and provides services to both institutional and consumer markets.
Between the 2018 and 2021 period, Nexo paid dividends to token holders in NEXO tokens only for holders voting to end the program, instead preferring to receive daily payouts of up to 12% APY on their NEXO holdings.
The SEC's lawsuit against Binance and Coinbase isn't exclusively affecting the tokens listed as security but the broader crypto space, which has already been going through a bear market ever since prices topped out in Nov. 2021. While the outcome of these cases can have far-reaching consequences for the market, it is unifying the crypto industry against the regulators and their anti-crypto stance.