- On 5 June the SEC sued Binance, the world’s largest crypto-asset platform, and the next day Coinbase.
- The complaint was the same: operating without registration as securities intermediaries.
- Jurisdiction becomes a decision of substance: where the platform is registered, which rules govern it and how customers’ assets are protected.
On 5 June 2023 the US SEC sued Binance, the world’s largest crypto-asset platform, and the next day Coinbase, for operating without registration as securities intermediaries. It was an offensive by the regulator against the sector’s large platforms.
The lawsuits came a few weeks after Europe had approved its own framework for crypto-assets. The contrast between the two approaches, prior rules on one side and action through the courts on the other, offered a practical lesson in how the way of regulating affects those who operate in a market and those who entrust it with their money. For users, the news raised very practical doubts about the safety of deposited funds and about whether they could keep trading normally, questions that any user of these platforms was asking.
What they were accused of
Behind both lawsuits stood the SEC, the US securities markets regulator. The complaint was the same for both platforms: not having registered as securities intermediaries, that is, not complying with the rules required of anyone intermediating in this type of product.
Registering entails being subject to obligations of transparency, customer information and supervision. The regulator’s thesis was that certain activities of these platforms had to meet the same requirements as any other securities intermediary. The companies sued had the right to defend themselves and the matter was left in the hands of the courts. A lawsuit is not a conviction: proceedings can drag on for months or years, and the outcome can be a settlement, a ruling or a change in the way of operating. Meanwhile, legal uncertainty persists.
Two models of regulation
While Europe was approving clear rules, the United States was regulating through lawsuits. The difference is relevant: a prior regulation lets companies know in advance what is expected of them, whereas a lawsuit turns a court into the place where limits are set.
Neither model removes uncertainty completely, but the nature of that uncertainty changes. With written rules, the challenge is to adapt to them; with litigation, the challenge is to wait for it to be resolved and accept that the outcome may change how the whole sector operates. For sector companies operating from Europe, the combination of a clear European framework and a disputed US one complicates planning, because they must decide which markets to serve and under which rules.
Why jurisdiction matters
For investors and intermediaries, the jurisdiction in which they operate became a decision of substance. Where a platform is registered, which rules govern it and how customers’ assets are protected are questions anyone should be able to answer before entrusting it with their money.
If you deal in these assets, it is also worth knowing the tax treatment and reporting obligations that apply in each case, and not assuming that what holds in one country holds in another. This is not a recommendation to buy or sell: it is about knowing whom you are dealing with and on what terms, something an adviser can help clarify. A simple habit is to check on each platform’s website which specific entity provides the service, where it is established, what authorisations it declares and how it describes the custody of customers’ assets. And it is wise not to concentrate with a single operator everything held in this type of asset, nor to rely on a well-known brand being equivalent to a guarantee. Diversifying custodians is a basic form of prudence.
In a sector whose legal definition is still taking shape, prudence starts with knowing whom you deal with and under which rules.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
