Reflections on the SEC’s lawsuit against Binance: What are the reasons behind the controversy?

Why is there controversy around the SEC's lawsuit against Binance?

The regulatory storm surrounding the SEC’s lawsuit against Binance is escalating, but the essence of this event is whether tokens such as ETH are securities, a responsibility that lies with the Supreme Court. The current dispute only reflects one fact: the ambiguous regulatory relationship in the cryptocurrency market has been imbalanced for many years. Haotian, a blockchain researcher at CryptoInsight, explores the underlying reasons behind this dispute.

For many years, the boundary of interaction between regulatory agencies and the cryptocurrency industry, such as their responsibilities and obligations, has been very vague. It cannot be considered opposition, but it also cannot be considered cooperation, and is in a subtle gray area. In history, there have been precedents such as EOS, Kraken, Tezos, etc., which ultimately ended with fines as a phased tradeoff. However, the SEC’s attitude towards Binance Exchange’s appeal is eager and chaotic, and a simple fine may be difficult to settle.

In my personal opinion, the storm behind this reflects the regulatory anxiety about “losing control” of the cryptocurrency industry, manifested in: 1) regulators begin to feel that VASPs have a hardcore attitude but act in a contrary way; 2) Binance’s “monopoly” position in the global liquidity of the cryptocurrency industry is highlighted. According to imprecise data, Binance accounts for 50-65% of the global cryptocurrency trading volume, with over 100 million global users and a daily trading volume of over 70 billion US dollars, exceeding 2-5 times that of other top exchanges; 3) The FTX exchange’s explosion taught regulators a lesson, and they began to realize the complexity of investment skirts, asset leverage ratios, and business portfolio in the cryptocurrency market.

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In summary, this SEC’s arbitrary regulatory action is essentially anxiety about losing control of the changing cryptocurrency environment. In the short term, it will cause the market to panic, but if the complex relationships and contradictions are clarified, it will naturally be full of confidence in the market’s long-term development again. Looking at it from another perspective, isn’t regulatory anxiety about VASP liquidity being too concentrated also a disguised encouragement to the decentralized DeFi world? As for how long this regulatory storm will last and how it will end, I hold an optimistic attitude because the overall regulatory context has not changed.

Reference: https://twitter.com/tmel0211/status/1666984760894451712

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