In April of 2018, the U.S. Securities and Exchange Commission (SEC) took legal action against the popular online cryptocurrency exchange, Binance, for operating in the United States without registering as a security. This filing marked the first time the SEC had taken action against a major crypto exchange.
What Did the SEC File?
The SEC filed an administrative cease and desist order in which it alleged that Binance had violated the registration provisions of the federal securities laws by providing exchanges services to U.S. customers without being registered with the SEC. Specifically, Binance was providing its platform to U.S. customers to buy and sell digital assets, including cryptocurrencies, and offering them the ability to trade in digital asset-denominated investment vehicles.
On the same day that the SEC filed its cease and desist order, Binance reached a settlement with the agency. As part of the settlement, Binance agreed to pay a total of $300,000 and admit to its failure to register as a security.
What Does This Mean?
This action by the SEC is an important reminder that cryptocurrency exchanges are subject to the same regulations and oversight as other financial services. The SEC has made it clear that any company operating in the US that provides cryptocurrency exchange services must register with the agency. Similarly, any US-based investor who uses these services must be aware of the risks associated with these activities.
The SEC’s action against Binance should also serve as a reminder that the cryptocurrency market is still highly speculative and unpredictable. As with any investment, individuals should approach these markets with caution and carefully consider the risks involved.
Finally, the SEC’s action against Binance should serve as an indication of the agency’s commitment to protecting investors and enforcing securities laws. As the crypto markets continue to evolve, the SEC’s enforcement efforts are likely to become increasingly important in ensuring that investors are properly protected.