And so one question about this week’s cases is: Is the SEC suing Coinbase and Binance for being crypto exchanges, or for being bad crypto exchanges? Is the claim here “you let people trade crypto, which we think is illegal,” or is it “you let people trade crypto and steal their money”?
This might work out well for Coinbase: It might be able to go to court and portray itself as a good actor who tried to follow the law, while Binance looks like a bad actor who tried to ignore the law; Coinbase might win against the SEC and Binance might lose. But I have to say that, so far, Binance’s approach seems smarter. (Though obviously don’t put it in writing, etc.) Binance noticed that it’s illegal to run a crypto exchange in the US, and did it anyway, but minimized and compartmentalized its US exposure: It has relatively few US customers and seems to keep most of its business out of the US. Coinbase went all-in on the possibility of running a legal and regulatorily compliant crypto exchange in the US, and now the SEC has said that that’s impossible. If the SEC is right, what is left for Coinbase?
‘Enforcement 40’ for 2020
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