This week on Opto Sessions, Alex Svanevik, CEO and co-founder of blockchain information site Nansen, discusses his views on the legal cases that the SEC has commenced against crypto exchanges Coinbase and Binance. The cases have significant implications for the future of the digital asset industry in the US, as well as worldwide, with jurisdictions like Hong Kong actively courting decentralised exchanges.
On 6 June, the US Securities and Exchange Commission (SEC) issued charges against Coinbase [COIN], alleging that the world’s second-largest crypto exchange was operating as an unregistered securities exchange and broker.
The complaint references — but is “not limited to” — 13 crypto assets, such as tokens Solana and Polygon, which the SEC claims Coinbase has made available to trade as investment contracts, “and thus as securities”.
It follows hot on the heels of 13 charges against rival crypto exchange (and the world’s largest) Binance, which the SEC accuses of “blatant disregard of the federal securities laws and the investor and market protections these laws provide”, by inviting investors to trade digital asset securities through unregistered trading platforms. Binance is also accused of mixing investor funds with its own and diverting them to a European company owned by its CEO, Changpeng Zhao.
Alex Svanevik, the co-founder and CEO of the blockchain analytics platform Nansen, shares his views on the cases during this week’s Opto Sessions podcast.
Hoping for brighter times
“There are a few different outcomes you can expect,” says Svanevik. “My hope is that Coinbase will defeat the SEC in court, for a variety of reasons.”
Chief among these is Svanevik’s view that a positive outcome for the exchanges would prompt an uplift in crypto markets which, despite solid gains year-to-date, have struggled over the past two years. Victory for Coinbase would “be a pretty clear sign of brighter times ahead”.
On the other hand, should the SEC successfully prosecute either company, Svanevik feels there could be negative consequences for the future of the US’ digital assets industry.
A loss would “likely… force them and other crypto companies to relocate their businesses outside of the US,” he tells Opto Sessions.
The threat of relocation is not an empty one. Hong Kong’s legislative council member Johnny Ng tweeted on 10 June that “all global virtual asset trading operators”, including Coinbase, were invited to apply for a license to operate in the region.
Hong Kong has been accepting applications for crypto trading platform licenses since 1 June. Coinbase, meanwhile, is attempting to build operations in Abu Dhabi and Canada while awaiting a full license to operate in Singapore.
While Svanevik is critical of the form the current crackdown on crypto businesses is taking in the US, he feels that there is a need for regulation.
“The one thing that will increase institutional adoption is regulatory clarity, which, unfortunately, the US does not seem to be providing.” The places he thinks the industry could relocate to, such as the UK, Dubai, Hong Kong or Singapore (where Nansen is based) all benefit from a clearer regulatory framework for crypto businesses compared to the US.
“My hope is that Coinbase will defeat the SEC in court for a variety of reasons.”
A need for clarity
Svanevik is not the only observer to feel this way. Recent Opto Sessions guest Michael Venuto also took aim at the US authorities for leaving the industry in limbo, saying, “the reason there’s not a spot Bitcoin ETF in the market today is because there’s not already a law that says Bitcoin as an investment is treated the same way as a stock: meaning, if you hold it, you can’t pump it.”
Venuto also blamed a lack of regulatory clarity for the prevalence of scams within the space and said of the SEC that its “job isn’t to decide what Bitcoin is or to take the government stance on it”, but that such decisions had to be made by Congress.
In a tweet following the SEC’s complaint, Coinbase’s CEO Brian Armstrong said the company was “proud to represent the [crypto] industry in court to finally get some clarity around crypto rules.”
Coinbase’s chief legal officer Paul Grewal has hit back at the SEC tweeting on 14 June that the commission’s plans to change the way decentralised exchanges are treated under the 1934 Securities Exchange Act are “too flawed on process and substance to move forward”.
Grewal is joined by some US politicians and industry lobby groups, such as the Blockchain Association, in asserting that the SEC is exceeding its own purview in attempting to regulate digital assets that don’t necessarily fall under its jurisdiction.
Svanevik is undoubtedly correct in arguing that the fallout from the cases will have a profound impact on the future of the industry in the US — one way or the other.