Cryptocurrency
US tightens crackdown on crypto with lawsuits against Coinbase, Binance
The top U.S. securities regulator sued cryptocurrency platform Coinbase (NASDAQ:COIN) on Tuesday, the second lawsuit in two days against a major crypto exchange, in a dramatic escalation of a crackdown on the industry and one that could dramatically transform a market that has largely operated outside regulation.
The U.S. Securities and Exchange Commission (SEC) on Monday took aim at Binance, the world’s largest cryptocurrency exchange. The SEC accuses Binance and its CEO Changpeng Zhao of operating a “web of deception”.
If successful, the lawsuits could transform the crypto market by successfully asserting the SEC’s jurisdiction over the industry which for years has argued that tokens do not constitute securities and should not be regulated by the SEC.
“The two cases are different, but overlap and point in the same direction: the SEC’s increasingly aggressive campaign to bring cryptocurrencies under the jurisdiction of the federal securities laws,” said Kevin O’Brien, a partner at Ford O’Brien Landy and a former federal prosecutor, adding, however, that the SEC has not previously taken on such major crypto players.
“If the SEC prevails in either case, the cryptocurrency industry will be transformed.”
In its complaint filed in Manhattan federal court, the SEC said Coinbase has since at least 2019 made billions of dollars by operating as a middleman on crypto transactions, while evading disclosure requirements meant to protect investors.
The SEC said Coinbase traded at least 13 crypto assets that are securities that should have been registered, including tokens such as Solana, Cardano and Polygon.
Coinbase suffered about $1.28 billion of net customer outflows following the lawsuit, according to initial estimates from data firm Nansen. Shares of Coinbase’s parent Coinbase Global Inc closed down $7.10, or 12.1%, at $51.61 after earlier falling as much as 20.9%. They are up 46% this year.
Paul Grewal, Coinbase’s general counsel, in a statement said the company will continue operating as usual and has “demonstrated commitment to compliance.”
Oanda senior market analyst Ed Moya said the SEC “looks like it’s playing Whac-A-Mole with crypto exchanges,” and because most exchanges offer a range of tokens that operate on blockchain protocols targeted by regulators, “it seems like this is just the beginning.”
Leading cryptocurrency bitcoin has been a paradoxical beneficiary of the crackdown.
After an initial plunge to a nearly three-month low of $25,350 following the Binance suit, bitcoin rebounded by more than $2,000, exceeding the previous day’s high. It was trading just below $27,000 at 0410 GMT.
“The SEC is making life nearly impossible for several altcoins and that is actually driving some crypto traders back into bitcoin,” explained Oanda’s Moya.
BROKER, EXCHANGE CRACKDOWN
Securities, as opposed to other assets such as commodities, are strictly regulated and require detailed disclosures to inform investors of potential risks. The Securities Act of 1933 outlined a definition of the term “security,” yet many experts rely on two U.S. Supreme Court cases to determine if an investment product constitutes a security.
SEC Chair Gary Gensler has long said tokens constitute securities and has steadily asserted its authority over the crypto market, focusing initially on the sale of tokens and interest-bearing crypto products. More recently, it has taken aim at unregistered crypto broker dealer, exchange trading and clearing activity.
While a few crypto companies are licensed as alternative system trading systems, a type of trading platform used by brokers to trade listed securities, no crypto platform operates as a full-blown stock exchange. The SEC also this year sued Beaxy Digital and Bittrex Global for failing to register as an exchange, clearing house and broker.
“The whole business model is built on a noncompliance with the U.S. securities laws and we’re asking them to come into compliance,” Gensler told CNBC.
Crypto companies refute that tokens meet the definition of a security, say the SEC’s rules are ambiguous, and that the SEC is overstepping its authority in trying to regulate them. Still, many companies have boosted compliance, shelved products and expanded outside the country in response to the crackdown.
Kristin Smith, CEO of the Blockchain Association trade group, rejected Gensler’s efforts to oversee the industry.
“We’re confident the courts will prove Chair Gensler wrong in due time,” she said.
Founded in 2012, Coinbase recently served more than 108 million customers and ended March with $130 billion of customer crypto assets and funds on its balance sheet. Transactions generated 75% of its $3.15 billion of net revenue last year.
Tuesday’s SEC lawsuit seeks civil fines, the recouping of ill-gotten gains and injunctive relief.
On Monday, the SEC accused Binance of inflating trading volumes, diverting customer funds, improperly commingling assets, failing to restrict U.S. customers from its platform, and misleading customers about its controls.
Binance pledged to vigorously defend itself against the lawsuit, which it said reflected the SEC’s “misguided and conscious refusal” to provide clarity to the crypto industry.
Customers pulled around $790 million from Binance and its U.S. affiliate following the lawsuit, Nansen said.
On Tuesday, the SEC filed a motion to freeze assets belonging to Binance.US, Binance’s U.S. affiliate. The holding company of Binance is based in the Cayman Islands.
“It’s important to note that recent regulatory actions are aimed at ensuring that companies operating in the cryptocurrency industry are complying with securities laws and protecting investors – this will always be their goal,” said Joshua Chu, group chief risk officer at blockchain technology firms XBE, Coinllectibles and Marvion.
“These events will ultimately lead to a more stable and trustworthy industry, which could help to attract more institutional investors and mainstream adoption.»
TL;DR
- Litecoin (LTC) has jumped by double digits in the last 24 hours amid optimism around a potential spot LTC ETF approval by the US SEC.
- While analysts predict further gains, the RSI index indicates overbought conditions, suggesting a possible short-term correction.
More Room for Growth?
The cryptocurrency market hasn’t seen much action in the past 24 hours, with most leading digital assets either charting minor losses or consolidating at their levels from Sunday.
However, there are some exceptions, with Litcoin (LTC) being one of the most evident examples. The asset’s valuation has surged by approximately 10% on a 24-hour scale, making it the best performer from the top 100 club. It currently trades at around $116 (per CoinGecko’s data), while its market capitalization is inching closer to $9 billion.
Following the latest rally, the percentage of Litecoin investors sitting on paper profits has jumped to 77%, while 16% remain underwater.
An important factor that may have fueled the uptrend is the growing optimism that the US Securities and Exchange Commission (SEC) might approve a spot Litecoin ETF soon. Not long ago, the agency acknowledged Canary Fund’s intention to introduce that investment vehicle in America. According to Polymarket, there is an 81% chance that such a product will see the light of day before the end of 2025.
Numerous industry participants noted LTC’s resurgence, predicting this could be the start of an explosive bull run. The X user XForceGlobal assumed that the asset “is shaping up to be the next XRP.”
“I am accumulating for the next two years. The only missing piece is liquidity; yet, it has maintained one of the longest streaks of higher lows in price action – a key factor I look for when accumulating,” they added.
Carl Moon and Sjuul also weighed in. The former told his almost 1.5 million followers on X that LTC is breaking out of a particular ascending triangle, which could result in a price spike to $128.
Sjull maintained that the token’s chart looks “really promising,” adding that any potential corrections ahead could be interpreted as buy-the-dip opportunities.
Bulls, Beware With This Factor
Despite the overall optimism, Litecoin’s Relative Strength Index (RSI) signals a possible pullback in the short term. The technical analysis tool measures the speed and change of the asset’s price movements to help traders assess overbought or oversold conditions.
It varies from 0 to 100, with readings above 70 indicating that LTC might be overvalued and due for a correction. The ratio has gradually increased in the last few weeks, recently entering bearish territory.
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It is becoming increasingly difficult to mine blocks on the Bitcoin network. In other words, the security of the leading crypto network is rising by the day, and this is evident in the Bitcoin hash rate hitting a new high.
According to data from Blockchain.com, the metric reached an all-time high of 845 million on February 8, up more than 43% from a year ago. While this surge is a positive occurrence for the Bitcoin network because it increases its security and overall resistance to attack, miners now face more difficulty when producing blocks.
Bitcoin Hash Rate Hits ATH
The hash rate tells how difficult it is to mine a Bitcoin block by determining the estimated number of terahashes the network generates per second. This indicates how much computing power miners use to process transactions on the blockchain.
When the Bitcoin hashrate surges, mining new blocks becomes harder and more competitive, requiring more computing power and higher energy costs. The rise in hash rate also suggests that new miners are joining the network and/or existing entities are expanding their facilities.
Meanwhile, this surge in hash rate comes as the Bitcoin mining difficulty rises 5.61% over a week to 114.17 trillion. Data from CoinWarz shows that the Bitcoin mining difficulty, which adjusts every two weeks or 2,016 blocks, is currently at an all-time high. The latest spike occurred at block height 883,008, while the next adjustment is expected to be at 885,024 with an estimated 1.69%.
How Are Miners Coping?
Data from YCharts reveals that Bitcoin miner revenue per day has plunged a little, even amid the spikes in mining difficulty and hash rate. At the time of writing, Bitcoin mining revenue stood at $43.52 million, down 10.48% in the last 24 hours and 7.3% from a year ago. This means miners are not earning as much as they often do.
Bitcoin’s (BTC) current price also influences miners’ revenue. Due to several macroeconomic factors, the cryptocurrency has been struggling under $100,000 since the beginning of the month and has remained below $98,000 since Friday.
Low BTC prices and revenue could make it more difficult for miners to stay afloat and manage their operations properly.
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It is becoming increasingly difficult to mine blocks on the Bitcoin network. In other words, the security of the leading crypto network is rising by the day, and this is evident in the Bitcoin hash rate hitting a new high.
According to data from Blockchain.com, the metric reached an all-time high of 845 million on February 8, up more than 43% from a year ago. While this surge is a positive occurrence for the Bitcoin network because it increases its security and overall resistance to attack, miners now face more difficulty when producing blocks.
Bitcoin Hash Rate Hits ATH
The hash rate tells how difficult it is to mine a Bitcoin block by determining the estimated number of terahashes the network generates per second. This indicates how much computing power miners use to process transactions on the blockchain.
When the Bitcoin hashrate surges, mining new blocks becomes harder and more competitive, requiring more computing power and higher energy costs. The rise in hash rate also suggests that new miners are joining the network and/or existing entities are expanding their facilities.
Meanwhile, this surge in hash rate comes as the Bitcoin mining difficulty rises 5.61% over a week to 114.17 trillion. Data from CoinWarz shows that the Bitcoin mining difficulty, which adjusts every two weeks or 2,016 blocks, is currently at an all-time high. The latest spike occurred at block height 883,008, while the next adjustment is expected to be at 885,024 with an estimated 1.69%.
How Are Miners Coping?
Data from YCharts reveals that Bitcoin miner revenue per day has plunged a little, even amid the spikes in mining difficulty and hash rate. At the time of writing, Bitcoin mining revenue stood at $43.52 million, down 10.48% in the last 24 hours and 7.3% from a year ago. This means miners are not earning as much as they often do.
Bitcoin’s (BTC) current price also influences miners’ revenue. Due to several macroeconomic factors, the cryptocurrency has been struggling under $100,000 since the beginning of the month and has remained below $98,000 since Friday.
Low BTC prices and revenue could make it more difficult for miners to stay afloat and manage their operations properly.
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