Indeed, we can all agree that 2022 was a damaging year for the crypto market, and unfortunately, 2023 hasn’t gotten any better. Several crypto projects and businesses have exposed flaws and failed miserably, dealing a significant blow to the trustworthiness of the broader crypto space. Since the collapse of FTX, the situation has become increasingly chaotic, leading regulators and governments to intensify their efforts to clean up the space.
This week, the SEC rolled up its sleeves and took legal action against two of the biggest cryptocurrency exchanges in the world: Binance and Coinbase.
On Monday, the regulator filed a lawsuit against Binance, alleging major violations, particularly related to trading unregistered securities in an illegal manner. The following day, the SEC accused Coinbase of operating without a license, making it an illegal exchange.
Consequently, both exchanges experienced significant outflows as investors reacted to concerns about regulatory issues and liquidity. Additionally, the overall cryptocurrency markets witnessed significant swings following the lawsuits.
Binance, of course, denied the SEC allegations and claimed that its litigation would ‘undermine America’s role as a global hub for financial innovation and leadership’.
On Friday, Binance.US, the American arm of the exchange, announced the suspension of USD deposits and urged users to withdraw their fiat deposits from the platform. Binance attributed the suspension of fiat services to regulatory pressure faced by its banking partners and stated that these partners would be pausing fiat withdrawal services. The suspension is scheduled to take effect by June 13.
What’s next?
This is, for sure, the beginning of the end for the wild west of crypto, and I dare say it is very unlikely that Binance.US will survive. However, the SEC’s complaints could take years to litigate – take the Ripple case as an example. These complaints have to first stand in court, and one has to wonder if Binance or Coinbase will be compliant.
What is Bitcoin doing?
As the news hit, Bitcoin dumped to $25,427 but quickly recovered and bounced back above $27,000, which looks to have been a dead cat bounce. This morning, Bitcoin has slumped back down to $25,500, which is a telltale sign of investor jitters and an overall sense of the current negative sentiment surrounding the crypto market.
