Bitcoin Is The Safest Cryptocurrency Right Now

Key Points:

• After the current SEC attack on Binance and Coinbase, Bitcoin is in a safe position.
• If the SEC wins or loses the case, Bitcoin always has a way to grow.
• According to Gensler, Bitcoin, the largest cryptocurrency by market size, is a commodity, not a security.

The crypto sector has been forecasting harsher crypto regulation since Gary Gensler was sworn in as SEC chairman in 2021. While he was a professor of blockchain at the Massachusetts Institute of Technology, Gensler said that many cryptocurrencies are likely to be securities, which implies they should be regulated by the SEC and subject to US government authority. However, one cryptocurrency, Bitcoin, is not covered by the SEC’s definition.

The SEC has already taken action against certain industry businesses and initiatives, including Ripple Labs, Kraken, and most recently, the two industry giants Binance and Coinbase. Going forward, it is probable that the SEC will test the waters with smaller businesses before taking action against the two biggest and most well-known exchanges.

Current situation

Earlier on June 5, a piece of news provoked intense market debate. The US Securities and Exchange Commission has announced that Binance and its CEO, Changpeng Zhao (CZ), will be sued. This disclosure also had a direct impact on the cryptocurrency market.

According to rumors, the SEC has filed a lawsuit against the encrypted trading platform Binance and its CEO CZ for allegedly breaching securities trading regulations. Binance and its CEO CZ are being prosecuted for the second time by US authorities after being sued by the US Commodities Futures Trading Commission (CFTC) on March 28 for allegedly breaking trading and derivatives laws. Binance is facing a regulatory dilemma that is self-evident.

The SEC charged Binance Holdings, BAM Trading Services, BAM Management USA Holdings, and CZ with breaching federal securities laws and failing to safeguard investors. The defendants are accused of unlawfully selling crypto asset securities to US investors, as well as undertaking numerous unregistered offers and sales of crypto asset securities and other investment schemes on Binance.com and Binance.US through unregistered online trading platforms. Defendants reportedly generated billions of dollars in profits while putting investors’ funds in danger.

Bitcoin dropped as much as 7% after the claims were made public, the largest one-day decrease in over three months.

Among other things, the SEC claimed that two Binance coins, BNB and BUSD, were securities that were fraudulently offered and sold by the business. According to the SEC, Binance and its U.S. affiliates are not really independent of one another and operate as an exchange, broker, and clearinghouse without being registered with the SEC.

The SEC revealed that, despite CZ and Binance publicly claiming that Binance.US was an independent trading platform designed for US investors, CZ and Binance surreptitiously controlled the site’s functioning behind the scenes. Moreover, beginning in August 2021, Binance will no longer require users with account withdrawal limits to provide any KYC information when creating an account, allowing them to circumvent anti-money laundering regulations.

At the same time, the SEC said that, although Binance offered securities-related services to US consumers, it purposefully avoided oversight by US regulatory authorities, placing billions of dollars in US investor money in danger of loss and leaving Binance and CZ at the mercy of regulators.

On June 6, only one day after launching a civil complaint against the cryptocurrency exchange Binance, the SEC filed another lawsuit against another cryptocurrency exchange, Coinbase, although not as many as the 13 lawsuits filed against Binance yesterday. Serious charges are not the same. This time, Coinbase faces just seven allegations, and the substance of the case seems to be “innocuous.”

Bitcoin is not on the list of securities listed by the SEC

According to the claims, the SEC also classifies some tokens traded on Binance.com and Binance.US, such as SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI, as securities, which may represent a danger to other exchanges.

Binance, on the other hand, was hit with additional penalties as a result of its separate Binance US exchange. According to the SEC, Binance founder Changpeng Zhao had great power over Binance US and utilized it to list BNB, knowing that BNB was likely security and aiming to mislead VIP customers into ordinary Binance exchange.

Both companies are facing prosecution for listing unregistered securities. Even Binance’s stablecoin, BUSD, was classified as a security, while Coinbase’s stablecoin, USDC, escaped untouched.

One thing that can be considered a coincidence is that proof of work (PoW) tokens are not on this list, the biggest representative that we cannot fail to mention is Bitcoin.

Why is Bitcoin so safe?

The result of the case will permanently alter the Bitcoin sector. If the SEC prevails, it will have more authority over exchanges and cryptocurrencies that may be classified as securities.

If the SEC prevails in its action, claiming that listed cryptocurrencies are securities, it would fundamentally alter how the cryptocurrency sector operates. Labeling smart contract protocols such as Polygon and Solana as securities poses a number of issues, including how users must record what they use to pay transaction fees, the legal status of validators, and if any DeFi apps are legally permitted to exist. These classifications are probably more harmful to the industry’s long-term sustainability than the Binance shutdown and need a new categorization for these sorts of assets.

If the SEC loses the lawsuit, the Bitcoin sector will be stronger than ever. Less regulation will allow firms to take greater chances and provide new services, and cryptocurrencies will continue to thrive.

Chair Gary Gensler may have tried to avoid questions about whether Ethereum and other crypto assets are securities lately, but he definitely sounded confident in 2018.

Gensler, a civilian at the time and speaking merely in his role as a professor, seemed to be just reciting the SEC’s ideas from 2018—specifically, former Director of Corporate Finance William Hinman’s much-cited “sufficiently decentralized” statement from June of that year.

A video of the senior regulator delivering a lecture at the Massachusetts Institute of Technology has surfaced on Twitter. According to him, Ethereum is “not a security” in the eyes of the SEC.

Nevertheless, Gensler has long intended to categorize Ethereum as a security, but the two lawsuits do not include it, implying that the SEC is either waiting for the case to create a stronger legal argument against it or cannot find one. In any case, ETH is now secure, but not indefinitely.

An asset fulfills the definition of security under US law if it is a monetary investment in a joint company with the expectation of return dependent on the labor of others.

According to Gensler, Bitcoin, the largest cryptocurrency by market size, is a commodity rather than a security. It’s the only crypto asset about which he’s ready to speak publicly right now.

Considering the facts presented above, the only cryptocurrency that is guaranteed to be secure is Bitcoin, which has been designated as a non-security.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

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