GM DOers! š
When we saw this post on Monday we thought it came from a CT shitposter. I meanā¦ Would the almighty SEC, tweet out a picture of a quote that include the words: fucking and bro? š
sec.gov/news/press-relā¦
8,780
I couldnāt believe it myself. But I then forgot about it after waking up to a second GM from the SEC:
We read SECās allegations against the worldās 2 largest crypto exchanges. Some are concerning, some are confusing and others are over the top.
Weāll break it all down in just a secondā¦ But first, I just want to calm everyone down. š
While the charges and allegations against Binance are very serious (FTX vibes), this is all short-term FUD and itāll likely take YEARS until any solid decision is made. šØ
As for Coinbase, it seems like the SEC just wants to stall.
And by the time any decision is taken for either exchange, Bitcoin and Ethereum will probably see new ATHs and weāll all be alright. š
Remember, the SEC can regulate centralized companies; it canāt regulate decentralized protocols and assets! (Thatās the whole idea) š„
So yes, these regulatory concerns are definitely a worry short-term, but ultimately, crypto will remain and continue to flourish (with or without the USA).
Youāve protected my investments by allowing me to buy $ETH a few % lower than I otherwise would have
Appreciate the Binance FUD
Yours truly,
- a consistent monthly buyer of crypto regardless of your dumbass rules from the old world
With all of that said, I have a question for you: On a scale from 0-10, how concerned are you about the SECās actions?
Respond to this email with your answer! (10 represents highest concern).
Now, letās get into why the SEC sued Coinbase, the 13 SEC charges against CZās empire, Binanceās response, a breakdown of whatās true and whatās not, and some actionable advice for you as an investor and builder.
Letās roll ā¬
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The SEC Sues Coinbase š”ļø
āYou violated our laws for yearsā ā thatās the basis of the SEC's suit against Coinbase.
Yet, in April 2021, the SEC let Coinbase do an IPO (aka go public on the stock exchange). Normally, the SEC must review, do their due diligence and then approve a public listing.
Clearly, they didnāt do their homework (reminds me of Raulās investments in crypto).
You're basically incriminating yourselves for not doing your due diligence.
How can we trust you @GaryGensler?
This all looks like the SEC is trying to buy some time. They refuse to provide regulatory clarity and then sue the biggest exchanges for violating laws that barely exist.
Most of the laws that dictate if a token is a security were written 50-70 years ago. Thatās what I mean with ābarely existā. Theyāre ancient and donāt apply today!
So this all looks like the SEC is stalling. But itās unclear what theyāre trying to buy time for.
Charles Hoskinson (founder of Cardano) said: āThe end goal is a agenda based CBDC partnered with a handful of massive banks and end-to-end control over every aspect of your financial life.ā
But for now, itās all speculation. The bottom-line is that the SEC is clearly delusional (when it comes to this Coinbase suit).
But what about Binance?
The 13 SEC Charges Against Binance š§āāļø
The Securities and Exchange Commission (SEC) has just made some serious claims against Binance, BAM Trading Services Inc. (the company behind Binance US), and Binance's creator, Changpeng Zhao.
To break it down for you, here's a user-friendly take on what the SEC's press release tells us:
š° Commingling customer assets or diverting customer assets to Sigma Chain: Zhao and Binance are accused of exercising control of the platformsā customersā assets, permitting them to mix customer assets or divert customer assets as they please, including to an entity Zhao owned and controlled called Sigma Chain.
šļø Operating unregistered national securities exchanges: Binance and BAM Trading are accused of running these exchanges without proper registration, potentially creating risks for investors.
šŖ Unregistered offer and sale of Binanceās own crypto assets (BNB, BUSD) and crypto-lending products (Simple Earn, BNB Vault): Binance and BAM Trading are charged with offering and selling crypto assets, including Binance's own exchange token (BNB) and stablecoin (BUSD), without proper registration and is alleged to have offered crypto-lending products to the public without going through the necessary registration process.
š® Secretly controlling the Binance.US platformās operations: Zhao and Binance are alleged to have falsely claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, when in reality, they maintained substantial involvement and control over its operations.
š Manipulative trading to inflate trading volume: The SEC alleges that Sigma Chain engaged in manipulative trading that artificially inflated the platformās trading volume, leading to distorted price information and trading patterns.
Essentially, these folks are in trouble for bending the rules. They didn't register where needed, and they might've duped customers by puffing up their platform's security.
They're also under fire for secretly letting big U.S. clients trade, and they might've played hide-and-seek with heaps of investor cash.
Whatās their response?
Binanceās Response š„
Binance was quick to respond in a press release that you can read here. But Iāll try to give you a TL;DR.
š Binance is disappointed that the SEC filed a complaint against them, as they have actively cooperated with the SEC's investigations and made efforts to answer their questions and address their concerns.
āļø They believe the SEC's allegations shouldn't be the subject of an enforcement action and plan to defend their platform vigorously.
š Binance criticizes the SEC for not providing clear guidance to the digital asset industry, accusing it of regulating through enforcement and litigation instead of a thoughtful approach that considers the complexity of the technology.
š They express concern that the SEC's actions could undermine America's role as a global hub for financial innovation and leadership, as they argue that regulation through enforcement isn't the best way forward for a largely undeveloped area of law like digital assets.
š Binance refutes any allegations that user assets on the Binance.US platform have been at risk, insisting that all assets on Binance and its affiliate platforms, including Binance.US, are safe and secure.
šÆ They suggest that the SEC's actions seem more focused on claiming jurisdiction from other regulators, making headlines, and not prioritizing the protection of investors.
š¤ Despite the SEC's actions, Binance is committed to cooperating with regulators and policymakers worldwide and continues to promote a regulatory framework that fosters innovation while ensuring consumer protections.
š„ Binance states they will fight the SEC's alleged overreach to the full extent of the law, and they stand with digital asset market participants in the U.S. against this perceived overreach.
š”ļø They will continue to work with industry partners to defend against what they see as misguided lawsuits and maintain their efforts to provide a safe and trusted platform for users, holding true to their core value of furthering the freedom of money.
š¤ Thanks to our trusted exchange partner, BYDFi.
We believe that weāre in the early stages of a bull run and thereās no better time to buy crypto. This is when you should be practising monthly dollar cost averaging into strong network tokens like Ethereum and Bitcoin. šŖ
And if youāre buying itās important to do so with a licensed and reputable exchange. Thatās why we recommend using BYDFi. š
Whatās True And Whatās Not? š¤·
There are three main points of the 13 Binance allegations that need to be covered. Read this before you lose your shit! š
1. Binance functioning unlawfully as a securities market
Whatās a security? Thatās a more commonly asked question than āWhat is a woman?ā.
And to be honest: We donāt know. Part of why we donāt know is the SEC's lack of clear regulation. The same thing that Coinbase is struggling with, as we wrote here.
Therefore, debating this now is pointless, so we wonāt do it! Instead, weāll focus on what the SEC deems as a security under Binance:
The BNB token ā Stating that Binance held an ICO for BNB to raise funds that were used to improve the Binance exchange. If thatās true, then this would be a security
Staking service ā This is also understandable. Binance takes usersā money and gives a % fee in the form of a reward. A few weeks back, Coinbase received a Wells Notice from the SEC on the same topic. Therefore, itās not a surprise that Binance is charged with the same thing.
BUSD ā Not sure how the SEC sees this as a security. BUSD is minted 1:1 by Paxos, a regulated and registered company. Though, in February, Paxos did say they wanted to stop minting BUSD amid regulatory worries.
All of the above are fair points made by the SEC. While we canāt be sure that the BNB token, Binanceās staking service and BUSD are all securities, we can see why these are investigated.
However, besides that, whatās the most concerning is the fact that in 2018, Binanceās Chief Compliance Officer stated that: āWe are operating as a fucking unlicensed securities exchange in the USA, bro!ā
And that is concerningā¦ If the man thatās supposed to keep Binance from acting as an unlicensed securities exchange says that, somethingās off.
Onto the 2nd point:
2. Offering unregistered crypto assets
āCrypto is a securityā ā this was the main FUD of the last few years. Shut up... We donāt want to hear it anymore!
Especially not from a dude that taught about ā75% of the crypto market not being a security EVEN in the USā just a few years ago (watch the video below when you have some time).
In 2023 @GaryGensler's SEC has gone after 4 exchanges, numerous projects, & forced crypto offshore.
Just a few years ago he was teaching that 75% of crypto market was NOT a security EVEN in the US.
What changed?
In the SECās charge, the following cryptocurrencies were listed as securities.
That was then used to charge Binance with āoffering unregistered crypto assetsā.
It was also then used to sue Coinbase, for listing these tokens.
Itās crazy that a man and his agency can, with a snap of a finger, decide this overnight, based on ancient laws that donāt apply todayā¦
We believe that this is BS and that most of the tokens mentioned by the SEC wonāt be classified as securities when clarity arrives. We could be wrong though.
3. Commingling funds
Nowā¦ The most concerning allegation against Binance: commingling funds, which basically refers to when an exchange quietly dips into users' funds for other purposes.
Itās like you have a cookie jar filled with cookies that belong to everyone in the house. But then, one sneaky housemate secretly starts using cookies from the jar to trade for candy bars without telling anyone. Not cool.
Thatās what CZ is accused of. His other entities: Sigma Chain & Merit Peak were allegedly used to receive money from Binance, money that was used to:
Pump volumes on the exchange ā this with the goal to make it look like Binance is thriving.
Personal use ā Sigma Chainās bank account allegedly bought a $11M yacht. Did that money come from Binance? Maybe.
If this is true, then this is no different from what SBF did with FTX.
To put more gas on the fire, Brian Brooks (former Binance U.S. CEO) said: "I realized, huh, I'm not actually the one running this company, and the mission that I believe I signed up for isn't the mission. And as soon as I realized that, I left."
Brian Brooks also stated he had particular worries about what Merit Peak and Sigma Chain were doing on the Binance.US platform, saying: "Our customers couldn't, you know, clear orders without the presence of those makers on our platform, I thought that was a real problem."
That indicates that CZās role was also as a market maker, which (if not obvious) is illegal.
Nowā¦
What Does This Mean For You As An Investor or Builder? š°
This is a lot to take inā¦ I know! Thatās why we have a PRO Advice section. We want you to walk away with a sense of confidence.
One of the biggest regulatory agencies in the US (and therefore the world) is coming for the biggest industry players that are facilitating crypto purchases.
Without exchanges, it would be significantly harder for 90% of people to onboard into crypto and then onto web3, because exchanges offer a really smooth onboarding ramp from FIAT to crypto. So this is concerning.
Butā¦ You know the saying: When thereās blood is the market, you need to capitalize on the opportunity.
So weāre here to share actionable information for our PRO Builders and Investors so you can do just that. Letās go š
Builders
If youāre building in crypto and web3, donāt incorporate in the USA. Itās as simple as that.
Run your company out in the UK, Dubai, Singapore, or even El Salvador. Not only do you get tax benefits in some of these, but you have clear(er) rules and donāt need to deal with the SEC.
āInstead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America.ā ā Brian Armstrong, CEO of Coinbase.
Tokens are an incredible marketing tool for any business, they can also act as a permissionless and frictionless (and frankly much cheaper) means to distribute equity, governance or dividends for a company.
Tokens are simply an upgrade to the traditional system and the US hasnāt figured that out yet.
Donāt let the USA put a stranglehold on your business. The USA will fold in the coming years, we just donāt know if that will be 1 year, 5 years or 10 years.
Aināt nobody got time for that!
Investors
First of all, bad news like this would usually tank markets in a bear market. Markets barely flinched, this is a very bullish sign for the direction of this industry.
But secondly, regulatory FUD has been a constant pain in crypto and web3 for the last decade. Never has it caused long-term problems for this industry and to be fair, rarely does it cause short-medium term problems either.
The US can do whatever they want, crypto and web3 exist on the internet, not in a physical location, so it really doesn't matter. Thatās the beauty of decentralized protocols built on the internet.
But also, as weāve seen many times, the centralized companies that contribute and build in this space can move to any jurisdiction they please.
This is exactly what happened when China tried to ban Bitcoin mining in 2021. Everyone just moved to a more friendly jurisdiction.
This is a regulatory arbitrage for countries that ban crypto. No matter what, this space moves on. Decentralized protocols that solve real-world problems work like water flowing down a mountain with the help of gravityā¦ no matter what you put in front of it it will go around (or eventually through it).
Thatās what happened with the internet and will also happen with crypto and web3. Build your conviction and use these regulatory issues as buying opportunities, I did :)
That said, also understand that a lot of tokens in crypto are junk and can/will be regulated away. Decentralized assets on decentralized protocols like ETH and BTC (as well as many others) are here to stay though.
Keep stacking the good stuff, friends!
Thanks for reading, and weāll see you soon ā¤ļø
Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
