Blockchain Association CEO Kristin Smith responded to the U.S. Securities and Exchange Commission’s (SEC) lawsuits against leading cryptocurrency exchanges Binance and Coinbase, saying that the SEC does not have the authority to legislate regulations, and she believes that as the judicial process plays out, the flaws in the SEC’s approach will come to light.
“The SEC doesn’t make the law – it only makes accusations – and we’re confident the courts will prove Chair (Gary) Gensler wrong in due time,” Smith said in a statement.
The SEC filed lawsuits against both Binance and Coinbase earlier this week, alleging that Coinbase should have registered as an exchange with the SEC and accusing Binance of offering unregistered securities and permitting U.S. customers to use the global Binance platform, instead of restricting them to its U.S. platform, according to the SEC website.
Bloomberg Opinion columnist Matt Levine, a former attorney and investment banker, said that from the SEC's perspective, every crypto exchange in the U.S. is operating illegally.
“I am tempted to read yesterday’s lawsuit as kind of an endorsement of Binance by the SEC,” Levine wrote in his Money Stuff newsletter. “The SEC, and before it the CFTC, investigated Binance carefully and wrote a 136-page complaint about every bad thing it could find, and all it could find is that Binance is running a crypto exchange.”
Summarizing the lawsuits, the analyst concluded, “For the most part, the Binance complaint is the same as the Coinbase complaint: Binance is accused of operating a crypto exchange that was open to U.S. customers and that listed crypto tokens that are securities, without registering as a U.S. securities exchange.” He noted, "Just being a crypto exchange in the U.S. is, in the SEC’s eyes, illegal.”
Lawmakers have voiced criticism of the SEC's attempts to regulate through enforcement, with Sen. Cynthia Lummis saying on Twitter, "The SEC has failed to provide a path for digital asset exchanges to register, and even worse, has failed to provide adequate legal guidance on what differentiates a security from a commodity. The SEC's continued reliance on regulation by enforcement continues to harm consumers.
"Real consumer protection requires creating a robust legal framework that exchanges can comply with, not pushing the industry offshore or into the shadows," Lummis said.
Binance responded to the lawsuit with a blog post, calling it the latest example in which the SEC “has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology.”
The post said that globally and in the U.S., Binance will continue to cooperate with regulators and lawmakers and remains committed to productive engagement.
"We stand with digital asset market participants in the U.S. in opposition to the SEC’s latest overreach, and we are prepared to fight it to the full extent of the law,” the post stated.
Coinbase CEO Brian Armstrong responded to the lawsuit with a tweet, saying Coinbase is "proud to represent the industry in court to finally get some clarity around crypto rules."