SEC Charges Against Binance Add to Crypto's Many Risks

The worlds of cryptocurrencies and the blockchain that makes it possible are interesting. Intriguing. New technologies often bring innovative opportunities.

But an opportunity can need a gamut of support, capabilities, and processes. That is the case for cryptocurrencies, which are supposed to be non-centralized forms of currency. Instead, they seem more a form of speculation. Unfortunately, one where the mechanisms that are supposed to enable transparent payments are being changed with opacity over what happens with property, exactly the opposite of the claims the systems make. For CRE, that raises the question of what is secure enough to know that payments made or received remain where you’d think.

The Securities and Exchange Commission filed 13 charges against Binance, the largest exchange for cryptocurrency.

“Among other things, the SEC alleges that, while Zhao and Binance publicly claimed that U.S. customers were restricted from transacting on Binance.com, Zhao and Binance in reality subverted their own controls to secretly allow high-value U.S. customers to continue trading on the Binance.com platform,” the agency said. “Further, the SEC alleges that, while Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes.”

The SEC also claimed that Binance commingled billions in customer assets and sent them to a third party, Merit Peak Limited, that Binance founder Changpeng Zhao owned. In the 136-page complaint, the agency claimed to have evidence from internal company documents that showed knowing and intentional flouting of U.S. regulations and

In a blog post, Binance claimed to be “disappointed” and “disheartened” by the SEC’s allegations and that the firm had “actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns.”

“Today’s action is another in a line of examples where, as with other crypto projects facing similar suits, the Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology,” the company continued. “Unilaterally labeling certain tokens and services as securities – even ones over which other U.S. authorities have asserted jurisdiction – only compounds these problems.”

There have been other recently earthquakes in the crypto firmament, such as the closing of the exchange called FTX, which wiped out the value of the non-fungible tokens (NFTs) that were the primary currency used to buy space (a.k.a. “land”) and virtual toys on the most successful metaverse platforms like Decentraland, Sandbox and something called Bored Apes, as GlobeSt.com reported in February.

There have been many complaints in the crypto industry that the SEC had failed “to provide meaningful guidance to legitimate crypto businesses that are simply looking for a way to stay on the right side of U.S. regulators,” Reuters reported last month. Another exchange, Coinbase, sued the agency.

But whoever is right, wrong, truthful, or not, there are too many unknown in crypto at least in the U.S. to manage risk. If you can’t clearly identify, let along manage, risk. And until that is possible, the hopes of accepting and controlling cryptocurrency payments is a stretch too far, too soon.