044 – On June 5, 2023, the U.S. Securities and Exchange Commission (SEC) charged Binance Holdings Ltd. and its founder, Changpeng Zhao, with securities law violations, specifically 13 counts including tax fraud, money laundering and insider trading.

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To understand the origin of this situation we must go back to the end of 2019, when Binance announced that it would no longer allow access to customers from the United States due to regulatory issues in the country. Despite that move, in May 2021 the SEC launched investigations against the platform for allowing U.S. citizens to trade certain assets on the platform that did not comply with the law.

As the years have gone by, more and more investigations have been carried out into Binance and other exchanges, since being a system that is not regulated by any governmental entity in the world, it is sought that the crypto ecosystem has minimum parameters of use and thus comply with the different types of regulations stipulated worldwide.

It should be taken into consideration that the trading volume on the Binance platform is approximately $30 billion, which represents about 40% of the total traded worldwide. In case the allegations against Binance are confirmed by the SEC, a domino effect could be looming in the crypto world, since it would generate panic among investors in the first instance and a large volume of outflows could be evidenced; according to Reuters news portal, net outflows of up to $1.43 billion have been observed since the SEC’s complaint was made official.

Now, what could be the consequences if Binance is found guilty? First of all, there could be restrictive sanctions against the platform and even fines against top executives, including its founder, Changpeng Zhao. This could even result in Binance losing its operating licenses, which could lead to a sharp decline in trading volume.

Secondly, it could generate a domino effect, not only in the volume traded on other exchanges, but also in the price of crypto-assets, as for example has happened with Bitcoin, which since June 5 has fallen by up to 5.51% and is trading at around $26,400. In addition, Binance’s cryptocurrency, BNB, when the news was released showed a drop of 9.2%, being the biggest fall since last November.

It should be taken into consideration that there are other entities investigating the platform, such as the Financial Conduct Authority of the United Kingdom (FCA), the Monetary Authority of Singapore (MAS), the Financial Services Agency of Japan (FSA), among others. With this we can see how various regulatory bodies have been seeking to sanction and/or restrict the use of the platform, although this is unlikely to happen due to the importance that the crypto world has had in recent years.

We will have to closely follow the repercussions that these actions may have in the long term, but without a doubt the simple fact of the lawsuits against the platform has generated doubts in the short term projections and has generated panic and uncertainty in many of the investors that use the Binance platform and other exchanges.