The fallout from last week’s regulatory actions against the cryptocurrency sector continues to reverberate.
As Bloomberg News reported Monday (June 12), crypto prices have continued to drop — while remaining above the lows recorded this weekend — in the wake of last week’s crackdown by the U.S. Securities and Exchange Commission.
Richard Galvin, co-founder of the Australian digital asset hedge fund DACM, told Bloomberg that sentiment is still uneasy following the SEC’s actions against Binance and Coinbase, leading investors to pull their money.
“There was some bounceback after the overselling on the weekend, but markets are extremely fragile,” Galvin said.
The SEC on June 5 charged Binance — the world’s largest cryptocurrency exchange — and its founder with artificially inflating its trading volumes, rerouting customer funds, failing to keep U.S. customers off its platform and misleading investors about market surveillance controls.
One day later, the SEC sued Coinbase for allegedly violating securities laws. Both Binance and Coinbase refute the SEC’s claims, and argue the agency is attempting to regulate the crypto sector via enforcement in lieu of rules for their industry.
“Crypto can’t be uninvented. It’s here to stay. What we need now are sensible policies and rules so we can all move forward together,” Coinbase CEO Brian Armstrong wrote on Twitter.
On June 9, Binance’s U.S.-based unit said it would suspend the use of dollars on the platform as banking partners are preparing to pull their support.
The Bloomberg report notes that the pace of withdrawals from Binance has slowed, with the company seeing $138 million in net outflows since Sunday (June 11) morning.
“Net outflows from Binance are not insignificant but still much smaller than what we saw in November during the FTX collapse, as Binance isn’t currently facing a crisis of confidence from their users,” Caroline Mauron, co-founder of digital-asset derivatives liquidity provider OrBit Markets, told Bloomberg.
In the meantime, both Coinbase and Binance have said they plan to carry on operations. And that might be the best strategy for these exchanges, as it can support their legal posture, Amias Gerety, Partner at QED Investors, told PYMNTS CEO Karen Webster.
However, he stressed that if the SEC were to eventually prevail in court, the classification of crypto tokens as securities wouldn’t mean the end of America’s digital asset industry.
“I don’t think it’s true that the securities laws are incompatible with the creation of value in the U.S. economy,” Gerety said, adding that, “in a world where the SEC wins, I think there will be a commensurate pressure on the SEC to create on-ramps for projects to register and comply.”