Regulators Continue to Wage War On Crypto

Any objective third party would come to the conclusion that the United States government isn’t a fan of crypto and seems to be doing everything it can to destroy it.

But, going through the pain of legislation is difficult.

When you are dealing with train derailments, laughable meetings, and, oh yeah, their own monetary and banking crises, going through the normal range of motions is just too time consuming.

Instead, it might be easier to kill crypto by just, well… cut off the industry’s banking access.

And, that is exactly what is happening. In what is now being dubbed “Operation Choke Point 2.0” in a callback to the last time regulators tried to shut down industries they didn’t like without having to go through the courts.

Unfortunately (and shortsightedly), the powers-to-be in the United States have moved from covert hatred of crypto to open warfare, putting multiple big names in their sights.

Coinbase’s Wells Notice

For all of their faults (which we discussed here), no crypto company works harder to follow the rules than Coinbase.

As the company notes, they have gone out of their way to cooperate with the SEC. Remember, they have:

• Gone through the vetting process to become a public company.

• Acquired two broker dealer licenses in an effort to become regulated.

• Filed a petition with the SEC in which they called for more regulatory clarity – they received no response.

And what is Coinbase’s reward for their efforts? Another Wells notice (an official way to tell a company that the SEC is going to sue them).

The Wells notice specifically takes issue with some (undefined) portion of Coinbase’s listed assets, the staking service Coinbase Earn (which was vetted by the SEC during the IPO process), Coinbase Prime (no reason given), and Coinbase Wallet (no reason given).

As you can see, the SEC and Gensler are grasping at straws here.

Thankfully, Brian Armstrong and the employees at Coinbase are ready for a fight.

Binance Sued By CFTC

On Monday, US regulators at the Commodity Futures Trading Commission (CFTC) sued Binance over allegations it had illegally served American clients. The commission also claims that the company “intentionally” hid their corporate headquarters in an “attempt to avoid regulation.”

The CTFC is specifically targeting Binance’s crypto derivatives product, failure to register as a futures commission merchant, and not implementing KYC/AML processes.

What you need to know is that Binance is split into two different entities. There is the regular Binance, the global exchange, and there is Binance US, the US version of Binance.

US customers are only allowed on Binance US, which does not offer the same crypto derivative products as the regular global Binance.

But, the CTFC claims that Binance instructed US customers to access the regular Binance through VPNs. And these aren’t just allegations as they apparently have internal chat logs and memos proving the case.

This is all occurring while Binance US is facing scrutiny in Washington for its $1 billion acquisition of Voyager’s bankrupt assets.

According to Nansen, the pressure caused customers to withdraw over $600 million in assets, which in all honesty is significantly less than they’ve seen in the past. Binance still holds more than $64 billion in crypto.

A settlement and hefty fine look likely. But, if the Financial Times is correct and Binance has hid its ties to China for years, expect to see much more fireworks.

The Hits Keep Coming

Besides the two big ones, the SEC has also recently made moves against SushiSwap and Justin Sun. How those cases ultimately end is anybody’s guess.

What is clear is that the US’s lack of regulatory clarity is making it increasingly difficult for crypto companies to operate in the country. How are you supposed to follow the rules if you don’t know what the rules are?

As VC and Coinbase Board member Katie Huan put it in the Wall Street Journal:

We need to stop regulating by enforcement and instead regulate by legislation.

If we don’t, we risk losing a burgeoning technology and thriving industry for good.