Last Updated on 3 weeks by Ameer Hamza
Now more than ever, the regulatory scrutiny on the crypto industry has increased. The reason is not far-fetched. Recently, there have been increased indications of the risks attached to investing in cryptocurrencies. Major crypto exchanges have suffered fund losses due to hack attacks. Most recently, both Luna and the TerraUSD experienced a shocking decline in value. These occurrences have drawn significant regulatory attention to the crypto industry.
Countries like South Korea have already initiated measures to ensure regulatory oversight of the crypto ecosystem. The United States has joined the bandwagon. In May 2021, the Securities and Exchange Commission launched a cybercrime unit to conduct a crackdown on Initial Coin Offerings (ICOs) in the crypto industry. Its most recent crackdown has featured Binance, one of the largest crypto exchanges by transaction volume and value.
This article will discuss the roots of the SEC’s crackdown on Binance over the BNB token. However, before we get to it, it will be helpful to discuss the SEC.
What is the SEC?
The Securities and Exchange Commission (SEC) is the primary regulator of the securities market in the United States. Its functions include the protection of investors and the maintenance of an orderly market. The SEC started its crackdown as one of its measures to protect crypto investors, especially in light of the asset’s investment risks.
What is the BNB Token?
BNB (Binance Coin) is a cryptocurrency that Binance created. Since the launch of the currency in 2017, its value has skyrocketed. BNB currently has a market cap of over $36 billion. However, the coin was released with an Initial Coin Offering (ICO) in 2017. An ICO is a form of funding for cryptocurrencies. With ICOs, coins that are set to be launched are offered to investors who buy up these coins. The point of contention with the SEC’s current crackdown on Binance is the BNB ICO conducted in 2017.
Why is the SEC Investigating Binance?
Ordinarily, news of an ICO would not spark any significant attention from regulators. This is because ICOs are still largely unregulated. However, the SEC has argued that Binance’s act of offering the BNB coin in its ICO could have broken SEC’s rules. To clarify, issuers of securities are legally required to register these issuances with the SEC. Similarly, these issuers are required to be registered with the SEC before conducting their operations. Failure to abide by these provisions will be regarded as a breach of the SEC’s rules. It appears that Binance might have breached these regulations during the process of BNB’s ICO.
What This Means for Binance
Surprisingly, this is not the first of the investigations launched into Binance. Last year, the Commodity Futures Trading Commission of the United States launched a series of investigations on Binance’s trading practices. While investigations are still ongoing, the outcome is expected to affect BNB’s value significantly. Already, BNB’s value was reportedly reduced by over 8% following the news of the investigation.