American regulators are asking similar questions. On June 6th the Securities and Exchange Commission sued Coinbase, the country’s largest crypto exchange, for failing to register as a broker, exchange or clearinghouse of securities. When markets opened, Coinbase’s share price dropped by a fifth.
At the core of both lawsuits is the idea that many cryptocurrencies are in fact securities. American law defines securities to include any “investment contract” that produces an asset for which an owner can expect to accrue returns depending on the effort of a promoter. Thehas suggested bitcoin, the world’s most valuable cryptocurrency, does not meet this standard. It has also avoided making definitive statements about ether, the second most valuable token.
Coinbase is listed in America. Binance, which has no formal headquarters, is a trickier case. It separated American operations from international ones, but regulators say it turned a blind eye to Americans trading on the international platform. The’s lawsuit notes a damning message sent by its chief operating officer to colleagues: “We are operating as a fking unlicensed securities exchange in theis “regulating by enforcement” and has failed to provide clear guidelines on what is permitted.
Second, more crypto firms will move to places with friendlier regulation and shun doing business in America altogether. Dubai will be one winner. It has set up a specialist crypto regulator and opened its arms to offices from Binance, Crypto.com and Bybit. The game of regulatory cat-and-mouse is not over just yet.