Explainer: Here's why SEC is going after Coinbase, Binance

livemint.com:

The US Securities and Exchange Commission (SEC) is cracking down on cryptocurrency behemoths Binance and Coinbase. Last week, the US SEC filed a lawsuit against the world's biggest cryptocurrency exchanges. Binance and Coinbase are both alleged to have violated the law by operating as securities exchanges without registering their businesses with the SEC. Binance has also faced charges of diverting customer funds to a separate business, among other accusations. The SEC has asked a federal judge to freeze the assets of Binance’s US platform.

Both Coinbase and Binance deny the SEC's allegations and have pledged to vigorously defend themselves in court.

The SEC alleged Coinbase traded at least 13 crypto assets that are securities, while it accused Binance of offering 12 cryptocurrency coins without registering them.

Why SEC is after Coinbase and Binance?

Since Gary Gensler became the chairperson of Wall Street's regulating body two years ago, his message to cryptocurrency firms has been consistent. “We don’t need more digital currency … we already have digital currency — it’s called the U.S. dollar." SEC chief Gensler said he would do all it takes to tame a world he likens to "the Wild West."

Gensler believes that most cryptocurrencies are securities, therefore, the current law gives his agency the power to regulate them. Notably, Coinbase and Binance are both being accused of failing to register their exchanges with the SEC. However, crypto firms are saying that by design, they are supposed to operate outside of the traditional financial system. Binance has suspended USD deposits while notifying customers that their banking partners are preparing to pause fiat (USD) withdrawal channels as early as June 13.

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