Last week, SEC went after the two largest cryptocurrency exchanges and accused them of many breeches and violations:

• The SEC accuses Binance of operating an unregistered securities exchange and failing to register its staking program as investment activities. The SEC also alleges that Binance engaged in market manipulation, mishandling of customer funds, inflating trading volumes and diverting customer flows from Binance US to Binance International.
• Coinbase is also accused of operating as an unregistered securities exchange and broker-dealer, because many of the tokens listed by Coinbase are securities and because its staking business is, in their opinion, an unregistered investment activity.
• As expected, both Binance and Coinbase have denied the SEC’s allegations. Binance has said that it will “vigorously defend” itself against the lawsuit, while Coinbase has said that it is “committed to working with regulators to develop clear and consistent rules for the crypto industry.” CZ stated that the SEC lawsuit was “a misguided and conscious refusal” to provide clarity to the crypto industry, and Brian Armstrong said that the SEC’s lawsuit was “hurting America’s economic competitiveness.”

What is immensely interesting and fascinating to me is that both exchanges continue operating “business-as-usual”, there is no blaming, no admissions of mistakes. It looks like they don’t view this incident as a failure at all. They almost expected it… and at least in the case of Coinbase, they even provoked the SEC by suing them first earlier this year. Most experts agree that these litigations are going to take many years, the local US legislation can (and hopefully will) change, and in the meantime, it is my prediction that Coinbase will likely be able to operate in the US and everywhere else almost unchanged, and Binance will likely start losing its partners, card processors, banking providers and other infrastructure solutions they use currently to operate their business.

This case study inspired me to add an additional section to my brand new and absolutely FREE training on The Rise of Business-like CCO, (starting next Monday, June 19th, at 12-30 CET!!!) where will talk about how to set up your FinTech compliance function in a way that supports resilience, scalability and pragmatic risk-taking. Managing compliance and managing a FinTech business are similar in ways that you have to deal with uncertainties, you have to try new things before knowing if they would work, and you have to make some bets.

There are certain behaviours and tactics done by Binance that Coinbase would never do, and the difference between them, in my opinion, is that Binance expected to become “too big to fail”, and Coinbase recognized that it would not be a viable strategy. They both took similar regulatory risks, but they took them very differently, and during our training, I’d like to share with the participants, some of the fatal mistakes from which Binance would not be able to recover easily and some of the smart moves by Coinbase that make all the difference.

Curious?

REGISTER TODAY and join over 200+ other participants who cannot wait to take their compliance performance to the whole new next level! Cannot wait to talk to you next week!

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