The Securities and Exchange Commission’s (SEC) ongoing legal investigations against top cryptocurrency exchanges Binance and Coinbase have generated debate about whether cryptocurrency tokens should be categorized as securities or commodities. Bernstein indicated in a recent research report that the SEC’s lawsuit against Ripple, which is scheduled to be resolved later this year, will provide critical clarity on the topic and set the tone for the industry in the near future.
The SEC charged Binance, its founder and CEO Changpeng Zhao (CZ), and Binance.US with breaching federal securities laws. A day later, the SEC sued Coinbase, another big cryptocurrency exchange, on similar grounds. Bernstein highlights that cryptocurrency regulation has become a highly politicized issue between Republicans and Democrats.
According to Bernstein’s research report, the regulatory actions are intended to create a functional framework for digital commodities and payment stablecoins, granting the Commodity Futures Trading Commission (CFTC) more regulatory authority than the Securities and Exchange Commission (SEC). With the CFTC earlier suing Binance for alleged malfeasance in recruiting US investors to its offshore derivatives platform, the SEC was anticipated to follow suit, citing securities violations and hinting that most tokens should be categorized as securities.
While the regulatory steps taken by the United States against Binance and Coinbase are regrettable, Bernstein believes they do not constitute an existential threat to the bitcoin market. According to the analysis, most of the capital that needed to exit the market has already done so, and the bad news looks to have been fully priced in. Following the events, the trading value of bitcoin (BTC) and ether (ETH) increased by roughly 3%.