The US Securities and Exchange Commission (SEC) is investigating Binance on suspicion of unauthorised securities trading, according to Bloomberg. The accusation: investors in BNB’s ICO in 2017 purchased the token with expected returns linked to the company’s growth. The SEC argues that BNB is therefore a security token, the sale of which Binance should have registered with the authority. The token originally published as Binance Coin (now called Build and Build) would have been marketed as an investment in the company and thus as a security, according to the SEC.
This is still determined with the so-called “Howey Test” – a framework from 1946, far removed from today’s investment reality. Consequently, the application to crypto-assets is not easy. Nevertheless, the SEC’s stance is clear, as SEC Chairman Gary Gensler stated at the Aspen Security Forum 2021: “I think every ICO I’ve seen is a securities issue.”
Proceedings with dynamite
In any case, the proceedings hold a fair amount of explosive power, given that BNB is currently the fifth-largest coin on the crypto market. Binance is facing a lengthy court case. This is also proven by the legal dispute between Ripple and the SEC: this dispute has already been called the crypto lawsuit of the century. The background is the money collected at the market launch in 2013: According to the SEC, these were not properly raised, as according to the SEC, XRP is in fact a type of security.
Ripple, for its part, claims that XRP is a real cryptocurrency like Bitcoin or Ethereum. The latest status at the beginning of June: The judge in charge held a meeting with the two sides in which she discussed documents that Ripple says are necessary to prove that the company has done nothing wrong. Included is an explosive transcript of a speech by SEC director of corporate finance Bill Hinman. Ripple’s lawyers submitted that this transcript would show that there was disagreement among SEC officials about whether XRP should really be treated as a security.
If the agency already disagrees on whether XRP is a security or not, this can be interpreted as a positive signal that the tide is turning in Ripple Labs’ favour. Once the process is complete, Ripple wants to be one of a handful of crypto companies to go public, as CEO Brad Garlinghouse said in a recent statement. In that case, a valuation of 10 billion US dollars seems realistic, which should also give XRP a strong price boost.