The U.S. Securities and Exchange Commission (SEC) has added more cryptocurrencies to its list of securities, totaling around 67, after taking legal action against Binance and Coinbase.
Over the years, the SEC has engaged in numerous lawsuits outlining its classification of cryptocurrencies as securities. In the case against Binance, the SEC designated ten cryptocurrencies as securities, namely BNB (BNB), Binance USD (BUSD), Solana (SOL), Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS) and COTI (COTI).
Likewise, in the lawsuit targeting Coinbase, the SEC added 13 cryptocurrencies to the securities list. It reiterated the classification of SOL, ADA, MATIC, SAND and AXS while including Chiliz (CHZ), Flow (FLOW), Internet Computer (ICP), Near (NEAR), Voyager Token (VGX) and Nexo (NEXO).
Among the notable cryptocurrencies previously deemed as securities by the SEC are XRP from Ripple, LBRY Credits (LBC) from LBRY (excluding secondary sales) and Algorand (ALGO), which was part of the charges against Bittrex in April.
In February, the SEC made a significant legal action against Terraform Labs, classifying 16 cryptocurrency assets as securities such as Terra Luna Classic (LUNC), Terra Classic USD (USTC) and Mirror Protocol (MIR). Around 13 Mirrored Assets (mAssets) aim to replicate stock prices like Apple and Tesla.
With its growing involvement in crypto-related litigation, the SEC’s oversight now extends to over $100 billion worth of the market, accounting for approximately 10 percent of the total capitalization of $1.09 trillion.
Gary Gensler, current chair of the SEC, has voiced his viewpoint that “everything other than Bitcoin” falls under the agency’s jurisdiction as a security. According to him, this is because the public expects certain profits from these cryptocurrencies.
Currently, there are around 25,500 cryptocurrencies listed by crypto data site CoinMarketCap.
Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC. https://t.co/FwpdmENvoL
— Gary Gensler (@GaryGensler) June 6, 2023
List of cryptocurrencies classified as securities by the SEC
The 67 cryptocurrencies classified as securities by the SEC include XRP, Telegram’s Gram (TON), LBRY Credits (LBC), OmiseGo (OMG), DASH, Algorand (ALGO), Naga (NGC), Monolith (TKN), IHT Real Estate (IHT), Power Ledger (POWR), Kromatica (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), XYO Network (XYO), Liechtenstein Cryptoasset Exchange (LCX), Kin (KIN), Salt Lending (SALT), Beaxy Token (BXY), DragonChain (DRGN), Tron (TRX), BitTorrent (BTT), Terra USD (UST), Luna (LUNA), MIR, Mango (MNGO), Ducat (DUCAT), Locke (LOCKE), EthereumMax (EMAX), Hydro (HYDRO), BitConnect (BCC), Meta 1 Coin (META1), Filecoin (FIL), BNB, BUSD, SOL, ADA, MATIC, ATOM, SAND, MANA, AXS, COTI, Paragon (PRG) and AirToken (AIR).
The SEC has also classified the following 13 Mirror Protocol mAssets as securities, namely Mirrored Apple Inc. (mAAPL), Mirrored Amazon.com, Inc. (mAMZN), Mirrored Alibaba Group Holding Limited (mBABA), Mirrored Alphabet Inc. (mGOOGL), Mirrored Microsoft Corporation (mMSFT), Mirrored Netflix, Inc. (mNFLX), Mirrored Tesla, Inc. (mTSLA), Mirrored Twitter Inc. (mTWTR), Mirrored iShares Gold Trust (mIAU), Mirrored Invesco QQQ Trust (mQQQ), Mirrored iShares Silver Trust (mSLV), Mirrored United States Oil Fund, LP (mUSO) and Mirrored ProShares VIX Short-Term Futures ETF (mVIXY).
The SEC’s lawsuit highlights the need for crypto firms to adhere to established regulatory frameworks when engaging in token offerings and public fundraising campaigns. The Commission asserts that the issuance and sale of cryptocurrencies should be subject to the same legal requirements and protections as traditional securities.
The SEC aims to safeguard investors and maintain market integrity. By subjecting cryptocurrencies to securities laws, the Commission seeks to mitigate risks associated with fraudulent activities, market manipulation and unauthorized sales.
Today we charged Binance Holdings Ltd. (Binance); U.S.-based affiliate, BAM Trading Services Inc., which, together with Binance, operates https://t.co/swcxioZKVP; and their founder, Changpeng Zhao, with a variety of securities law violations.https://t.co/H1wgGgR5ir pic.twitter.com/IWTb7Et86H
— U.S. Securities and Exchange Commission (@SECGov) June 5, 2023
Debates surrounding the SEC lawsuit
On a previous occasion, the SEC launched a lawsuit against Coinbase last Tuesday for engaging in illegal activities as a national securities exchange, broker and clearing agencyThe SEC filed the lawsuit in the U.S. District Court for the Southern District of New York after filing multiple charges against Binance.
Paul Grewal, chief legal officer of Coinbase, criticized the SEC’s enforcement-focused approach toward cryptocurrencies and called for the establishment of fair regulatory frameworks. He affirmed that Coinbase would continue operating its business as usual.
“The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have demonstrated commitment to compliance,” said Grewal.
In response to the lawsuit, Binance also said it had been actively cooperating with the financial watchdog during its investigation. The company, however, expressed its disagreement with the allegations, asserting that the jurisdiction of the U.S. SEC is limited, as Binance is not a U.S.-based exchange.
Amid these legal battles, the crypto industry is urging lawmakers on Capitol Hill to pass legislation that would mitigate the SEC’s authority in the crypto market. Grewal is scheduled to testify before the House Agriculture Committee to discuss a recently proposed crypto bill by GOP lawmakers.
Coinbase, active for more than ten years, has positioned itself as a crypto company supporting regulatory measures. It has obtained various state and federal licenses over the years, driving its growth while implementing a meticulous token evaluation process to ensure compliance with U.S. securities laws. However, the SEC dismissed these claims as mere “lip service.”
According to Gensler, the non-compliance of cryptocurrency exchanges with securities regulations has a detrimental impact on the integrity of the capital markets. In a CNBC interview, he expressed concerns about the crypto sector operating like the Wild West and highlighted the need for trust in the $100 trillion capital markets.
Gensler emphasized that the public would be shocked if financial institutions, such as the New York Stock Exchange, also operated hedge funds that traded against investors on their platforms. This comparison highlights the importance of maintaining integrity and transparency in the financial system.
“We don’t need more digital currency. We already have digital currency. It’s called the U.S. dollar. It’s called the euro. It’s called the yen,” he said.
“They’re all digital right now. We already have digital investments. So what is the real underlying value of these tokens?”
The SEC’s lawsuits profoundly affected the crypto sector, particularly Coinbase’s stock, which dropped by 10 percent on Monday. Other prominent cryptocurrencies like Bitcoin and Ether also experienced declines, falling by as much as five percent.
Gensler’s recent actions mark the continuation of a series of enforcement measures the regulatory agency took against crypto companies. These actions have intensified since the collapse of FTX seven months ago, causing unease among investors and prompting some executives to explore business opportunities abroad.
