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Coinbase’s ETF Surveillance Agreements Highlight Regulatory Advantage Over Binance Amidst SEC Lawsuits

Both Binance and Coinbase are currently facing legal issues in the United States, but the case involving Coinbase is generally seen as more positive for the industry and the future regulation of digital assets globally.

Contrasting Allegations: SEC’s Claims Against Binance and Coinbase

The US Securities and Exchange Commission (SEC) has filed lawsuits against both Binance and Coinbase within a 24-hour period, with differing legal arguments for each case. Coinbase is accused of violating five laws, while Binance’s lawsuit involves 13 alleged violations. The SEC has named CEO Changpeng “CZ” Zhao, BAM Trading Services, and BAM Management US Holdings as defendants in addition to Binance.

The key difference lies in the nature of the SEC’s allegations. The lawsuit against Coinbase primarily focuses on registration violations, while the suit against Binance includes more complex allegations such as fraud, market manipulation, and commingling of investor funds.

In the Coinbase lawsuit, the SEC targets the exchange for operating without proper registration and offering unregistered securities. The allegations involve 13 specific crypto assets. In the Binance lawsuit, the SEC focuses on the exchange’s staking program and alleges illegal unregistered offers and sales of securities, targeting Binance’s native tokens and several other tokens.

Coinbase’s ETF Surveillance Agreements: A Regulatory Advantage

It is widely anticipated that the Coinbase case will result in a settlement with a significant fine and potentially clearer regulatory guidelines for the broader digital asset space. Asset managers are refiling their ETF applications with Coinbase included for market surveillance, whereas Binance is not included.

Larry Fink’s Pro-Crypto Remarks and BlackRock’s Bitcoin ETF Application

Recently, Larry Fink, CEO of BlackRock, expressed positive views on cryptocurrency while the company applied for a Bitcoin ETF listing. Fink emphasized the role of cryptocurrency as similar to digitizing gold and suggested that a Bitcoin-linked ETF could democratize finance. He has frequently commented on crypto-related events and believes that Bitcoin can serve as an alternative investment and a hedge against inflation or currency devaluation.

Institutional investors are staying the course

EY team conducted a survey of 250-plus institutions on their sentiment, use and plans regarding blockchain and digital assets. Their findings suggest they are staying the course and are not moving away from crypto/digital assets, but are approaching their investments carefully with educated, tempered optimism. Institutions overwhelmingly believe in the long-term benefits of crypto/digital assets, and their abundance of caution stems primarily from concerns regarding regulatory uncertainty, identification of trusted institutions to partner with, and the need to ensure security and safe custody of this novel asset class.

Institutions see value in the ability to diversity assets, as well as the potential for asymmetric returns when investing in crypto/digital assets:

  • 93% of respondents believe in the long-term value of blockchain technology and/or digital assets.
  • 25% of respondents increased digital assets and/or related product holdings in 2022.
  • 69% of respondents expect to increase their allocations to digital assets and/or related products in the next two to three years.
  • 57% of institutional investors are interested in investing in tokenized assets, with 40% interested in starting this year or next.

Future Outlook: Coinbase at the Center, Binance’s Next Move Uncertain

As for Binance, with news of senior compliance executives leaving the company, it appears that Binance’s position is undergoing a shift that may have negative implications. The company is still operating normally, and regulators where Binance is licensed have not revoked their licenses. However, there are concerns about its future path, similar to FTX’s trajectory before its collapse.

The question remains about Binance’s next move. Despite positive asset flows, users trust and CZ’s apparent confidence, the situation could take an unpleasant turn.

Walid Abou Zaki

Founder and CEO of Unlock Blockchain Executive Director of Al-Iktissad Wal-Aamal Co.

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