Even as the crypto market woke up to the news of the Commodity Futures Trading Commission (CFTC) filing a lawsuit against crypto exchange Binance, SEC chair Gary Gensler reiterated caution for investors. The U.S. Securities and Exchange Commission (SEC) issued an investor alert to exercise caution with crypto asset securities. The caution from the regulatory agency came at a time when the traditional banking sector is in a crisis situation after the collapse of few regional banks.
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On Monday, the CFTC filed a lawsuit against Binance, the largest cryptocurrency exchange in the world by trading volume, over violation of U.S. regulations. Bitcoin price showed an immediate reaction to this news as BTC dropped below $27,000 level. Interestingly, the CFTC led to another debate by stating in the lawsuit that Bitcoin, Ethereum and Litecoin are commodities, as opposed to Gensler’s views that all cryptocurrencies except Bitcoin are securities.
Gary Gensler Alerts Investors
The SEC warned that investors in crypto asset securities might be deprived of key information and other important protections related to their investment. The CFTC lawsuit alleges that Binance “never registered with the CFTC in any capacity and has disregarded federal laws that are essential to the integrity and vitality of U.S. financial markets.” Accordingly, the SEC’s caution alert spoke about unregistered offerings in crypto asset securities and the lack of information surrounding them. This becomes even more important as CFTC claimed that a big portion of Binance’s reported trading volume and profitability came from US customers.
Hence, the investor alert from the SEC could be considered a timely reminder just after the latest CFTC action on Binance. The SEC’s warning also spoke about celebrity endorsements. “A celebrity endorsement does not mean that an investment is appropriate for all investors, or even that it is legitimate,” it said. Celebrities get paid to promote the investment opportunities including crypto assets, it added.
In reaction to the CFTC’s claim about Bitcoin, Ethereum and Litecoin being commodities, the Litecoin team welcomed it:
Certain digital assets, including LTC as alleged herein, are “commodities,” As defined under Section 1a(9) of the Act, 7 U.S.C. § 1a(9.
Litecoin is a Commodity. Nice to know we all agree on that now. pic.twitter.com/l1D0TDDnxK
— Litecoin (@litecoin) March 27, 2023
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Also, considering the flurry of enforcement actions on crypto businesses in recent weeks, it appears likely that more crypto companies will be dragged into similar lawsuits after big players like Coinbase, Kraken and Binance are already covered. XRP lawyer John Deaton said that over the next two years, the SEC would likely take up 200 enforcement actions on the crypto market.
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