Recently we’ve seen a lot of turbulence on the crypto market: collapses, litigations, insolvencies, layoffs… This might be a reason why SEC and CFTC have started to intensely pursue crypto firms, creating a challenging environment for the industry in the US. This article gives a short update on the recent events connected to the two major CEXs - Binance and Coinbase.
Coinbase
- At the end of March Coinbase got a Wells notice from SEC warning that the regulator might sue the company, alleging that it had violated securities laws. Coinbase called SEC’s investigation a “cursory” one and stated that they are confident in the legality of their assets and services.
- Meanwhile, SEC reached an “agreement in principle” with former Coinbase product manager Ishan Wahi accused of the insider trading. His brother and SEC “are also in good faith discussions that may resolve the SEC’s claims”. The deadline for the SEC’s Opposition is requested to be moved to April 15, 2023 to allow parties to review proposed settlements and to finalize the terms. This litigation started last July when Coinbase employee and his associates were accused of using confidential information in order to profit from new listings of tokens. This a nice reminder that any exchange consists of people and they might be far from knights in shining armour…
Binance
- The U.S. Commodities Futures Trading Commission filed a lawsuit against Binance along with its CEO, Changpeng Zhao, and former chief compliance officer Samuel Lim on March 28. The exchange is accused of violating the U.S. derivatives laws by offering its derivative trading services to U.S. customers without proper registration. Also CFTC claims that Binance has instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits. There were even rumours about CZ arrest (the information came from an encrypted tweet by the private Twitter account Cobie and wasn’t confirmed)... Binance is also currently under investigation by the SEC, Department of Justice and some other authorities.
- Blockchain analytics platform Kaiko reported that Binance lost 16% global market share this March due to the lawsuit and - more significantly - due to the end of zero-fee trading (Binance zero-free trading program was discontinued on March 22 and now users can enjoy zero fees on the BTC/TUSD spot trading pair only). Surprisingly the data studied by Kaiko show that this volume mostly vanished and didn’t change the market share distribution among the remaining exchanges.
These two exchanges are on top of the CoinMarketCap ranking. There were no major pieces of news connected to their major rivals (i.e. Kraken, KuCoin, ByBit, Bitfinex etc) and regulators recently. What can we say, in this case, silence can be considered a good sign…
While centralized exchanges are threatened by policymakers, the trading volume on decentralized exchange Uniswap is getting higher. Spot market volume on Uniswap in March was 45% higher than Coinbase's (and it happened for the second month in a row), but it is still only a fraction of transactions processed by Binance.
Crypto exchanges are always in the middle of various troubles, litigations, scandals and FUD, so all these pieces of news are not a clear sign of any upcoming troubles. But still, it is a sign that the US regulators have taken a more aggressive approach and this can lead to various problems for the crypto exchanges in the US and their users.
Well, we all need to be cautious and not to forget that exchanges, both centralized and decentralised, are not the best place to keep your funds. Stay tuned and we will continue to Observe for you!
