SEC files charges against Binance - Experts see far-reaching consequences

Following the news that the SEC has filed multiple charges against Binance, experts from ETC Group and ARK36 – respectively active in the crypto ETP and crypto hedge fund space – have shared their comments with us. Read on to see what these charges mean for the crypto industry and what the implications might be.

Bradley Duke, Founder and Co-CEO at crypto ETP provider ETC Group, says:

“Tech start-ups are encouraged to "run fast and break things" and to "ask for forgiveness, not permission", however when the sector the start-up is operating in is finance and investments, there can be real consequences to this approach. This is especially true in the US, where there is an absence of a regulatory framework for crypto, coupled with a regulator that has taken a very aggressive stance towards companies operating in the space.”

 Mikkel Morch, Chairman and Non-Executive Director of crypto hedge fund ARK36, says:

“The news about the Securities and Exchange Commission (SEC) filing charges against Binance entities and founder Changpeng Zhao has significant implications for various stakeholders in the cryptocurrency market.”

US Impact

“Firstly, for the US as a market for cryptocurrencies, these charges will have far-reaching consequences. The SEC are giving an extremely clear signal of strict financial regulatory oversight in the cryptocurrency industry similar to what is happening in the European Union. It is very clear that the SEC insists that all actors in the US market ensure proper investor protection. In this case Binance is accused of misleading investors, engaging in manipulative trading, and commingling customer assets. The consequence, if Binance is found guilty, may be further erosion of investor confidence in the market, potentially leading to a decrease in participation and investments. The charges by the SEC certainly also emphasise the importance of proper registration and compliance for crypto exchanges operating within the US.”

Consequences for Binance

“Secondly, for Binance itself, these charges could be highly damaging. Binance is one of the largest and most prominent crypto asset trading platforms globally. If found guilty, the reputational damage alone could be significant, leading to a loss of trust from users and backers. Additionally, the potential legal consequences could include substantial fines, penalties, and even the suspension or cessation of operations in the US market. Binance may also face increased scrutiny from regulatory authorities in other jurisdictions, further impacting its operations and expansion plans.”

Wider Cryptocurrency Market Impact

“The charges against Binance highlight the need for enhanced transparency, disclosure, and adherence to regulatory requirements across the industry. It reinforces the urgency for establishing clear regulatory frameworks to govern cryptocurrencies and exchanges to protect investors and maintain market integrity. These events may encourage other regulatory bodies worldwide to review and strengthen their oversight of cryptocurrency platforms and activities. However, other more so-called crypto-friendly jurisdictions with less stringent or more “pro crypto” regulations will certainly also gain a lot of business as is already visibly seen in the UAE, Hong Kong or Singapore. Long-term, if the EU and US are perceived as hostile to the cryptocurrency asset class then most likely more innovation and business will transition to those jurisdictions.”