The US Securities and Exchange Commission’s (SEC) lawsuit against crypto exchange Binance Holdings Ltd (幣安) and its cofounder and CEO Zhao Changpeng (趙長鵬) injects fresh uncertainty into a sector that is struggling to maintain mainstream relevance.
The SEC accused Binance and Zhao of mishandling customer funds, misleading investors and regulators, and breaking securities rules.
The action adds to the regulatory heat on the largest digital-asset trading platform. It is also another black eye for crypto after a rout last year that contributed to rival FTX’s downfall amid a flurry of fraud allegations.
Photo: Reuters
The market faces an uphill task to restore trust and, meanwhile, investors are moving elsewhere such as artificial intelligence stocks. The overall value of digital coins has plunged to US$1.1 trillion from a peak of more than $3 trillion in 2021, when giant stimulus fueled a COVID-19-era boom in tokens such as bitcoin.
Jane Street Group, Jump Trading and other major trading firms have pulled back from crypto in the US amid heightened regulatory scrutiny. The ensuing decrease in liquidity can pose an obstacle for investors by making it harder to get in and out of digital asset investments in an orderly way.
“The industry will be very different in a year,” Matrixport Technologies Pte Ltd research head Markus Thielen wrote in a note. “Trading volumes will likely drop further and pressure market makers’ revenue projections. Crypto in the US will continue to go through a nuclear winter.”
The SEC in the complaint cited 12 coins as assets that fall under its purview, expanding the list of tokens deemed unregistered securities to span more than US$115 billion worth of crypto. That implies strict rules should apply, which could make the tokens harder to trade if exchanges shy away from listing them.
Digital asset prices yesterday largely held a drop sparked by the lawsuit. An index of the top 100 coins has shed about 4 percent since the complaint hit on Monday. Bitcoin, the largest token, has fallen closer to the US$25,000 level.
The net outflow from the Binance exchange reached US$702 million on Monday, the highest since February, a Dune Analytics dashboard from exchange-traded products issuer 21Shares AG showed.
Binance called the SEC action “disappointing,” saying it had engaged with the agency in good-faith negotiations to settle the matter.
“While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis,” the firm said. “We intend to defend our platform vigorously.”
The exchange faces a web of probes, including a lawsuit by the US Commodity Futures Trading Commission.
Action by the US Department of Justice “against Binance and/or related entities or individuals might not be too far behind,” Bloomberg Intelligence senior litigation analyst Elliott Stein wrote in a note.
Outside the US, locations such as Hong Kong and Dubai are seeking to court crypto investment. The EU in April approved the most comprehensive digital asset rules of any developed economy.
That potentially gives crypto firms friendlier places to try and recover from a deep retrenchment and learn the lessons of last year’s crash.
“The lack of US regulatory clarity will drive crypto to other jurisdictions,” Venn Link Partners Pte Ltd founder Cici Lu (陸戈) said.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to