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The US Securities and Exchange Commission (SEC) has expanded its list of digital tokens classified as unregistered securities, now totaling more than $115 billion in cryptocurrency.
The recent lawsuit filed against Binance Holdings Ltd. by the SEC has brought attention to a dozen coins falling under the agency’s purview.
This designation subjects the assets to strict investor protection regulations and may pose challenges for trading if crypto exchanges hesitate to list them due to potential SEC repercussions.
Read on to understand the implications of this development.
Tokens Deemed Unregistered Securities
The SEC Complaint mentioned several tokens, including Binance’s BNB, stablecoin BUSD, Cardano’s ADA, Solana’s SOL, Polygon’s MATIC, Filecoin’s FIL and Algorand’s ALGO. Combined with other tokens like XRP, which is separately targeted by the SEC, the agency now identifies over $115 billion worth of coins as unregistered securities.
Impact on Exchanges and Market Makers
Exchanges such as Coinbase and Kraken, along with US-based market makers, face decisions on whether to delist these tokens to comply with SEC regulations. Jeff Dorman, Chief Investment Officer at Arca, in a statement published in a global media, highlights the potential challenges faced by these exchanges and market makers if they have to stop trading certain tokens classified as securities.
Coin Prices and Market Reactions
Following the SEC complaint, Filecoin experienced a 10% decline, while BNB saw an almost 9% drop. Other mentioned assets also suffered losses. In the broader digital-asset markets, Bitcoin and the top 100 coins declined by nearly 6%. However, industry experts predict that the lawsuit’s impact on coins’ prices might be short-lived as many of these tokens continue to trade on offshore exchanges.
Implications for Coinbase and Kraken
Coinbase and Kraken, two prominent US-based exchanges, are yet to comment on the implications of the SEC’s actions. In a different circumstance, Coinbase once stated that it cannot file its tokens as securities with the SEC until a final court decision is reached.
Regulatory Uncertainty Surrounding Cryptocurrencies
SEC Chairman Gary Gensler has consistently emphasised that most tokens fall under the agency’s investor protection laws, but labelling specific tokens remains a complex task.
The SEC’s lawsuit against Binance and the subsequent inclusion of tokens in the unregistered securities list have raised concerns within the cryptocurrency community. The outcome of the development may shape the regulatory landscape for cryptocurrencies, impacting market dynamics and investor protection measures moving forward.