The U.S. Securities and Exchange Commission (SEC) is seeking to temporarily suspend its prominent lawsuit against the cryptocurrency exchange Binance as it attempts to project a friendlier stance toward digital assets under new leadership.
On Monday, both Binance and the SEC submitted a joint motion requesting a 60-day delay in the lawsuit that the regulatory body had initiated two years ago during the tenure of former Chairman Gary Gensler.
The motion filed in the U.S. District Court for the District of Columbia stated that the SEC had approached Binance regarding the pause. The regulator indicated that a newly established cryptocurrency task force, spearheaded by Acting Chairman Mark Uyeda, aims to strengthen the agency’s relationships with the crypto sector, which might influence and help in resolving the ongoing case.
This joint request marks the first clear indication of a shift in approach from the SEC regarding ongoing enforcement actions, noted Carol Goforth, a law professor at the University of Arkansas School of Law.
As the largest cryptocurrency exchange globally, Binance operates a platform where users can buy, sell, and store a variety of cryptocurrencies. The SEC’s lawsuit attracted significant media attention when it was first announced. During that period, Gensler made serious allegations against Binance and its CEO, Changpeng Zhao, claiming they had maintained a widespread network of deception. The SEC even highlighted a notorious quote from Binance’s chief compliance officer revealing concerns about operating as an unlicensed securities exchange in the United States.
In a different case, Binance ultimately agreed to a substantial settlement of around $4 billion, while Zhao pleaded guilty to a felony charge concerning his inability to prevent money laundering activities on the platform.
A central debate within the cryptocurrency sector revolves around whether specific digital assets should fall under securities regulation, a stance previously advocated by the SEC under Gensler, in sharp contrast to the views held by many in the crypto community.
Cryptocurrencies have rapidly transitioned from niche financial instruments to mainstream assets, even as they face challenges such as scandals and market crashes. The SEC has intensified its scrutiny of crypto exchanges, including Binance and Coinbase, accusing them of operating without proper registrations. This increased vigilance followed the infamous collapse of FTX, an exchange established by the now-infamous Sam Bankman-Fried.
The crypto industry has voiced concerns about being treated unfairly by the Biden administration and specifically by Gensler. In contrast, it heavily funded Trump and Republican candidates during the last election cycle. Former President Trump and GOP lawmakers have expressed a willingness to introduce accommodating legislation and regulations for the cryptocurrency sector.
Uyeda initiated the new crypto task force last month, underscoring the need for a renewed strategy towards digital assets. He stated that the SEC had predominantly relied on enforcement actions to retroactively regulate the crypto space while adopting innovative yet untested legal interpretations. The agency also acknowledged that clarity regarding registration requirements and practical solutions for potential registrants had been lacking.
Legal analysts suggested that this pause in the Binance case could lead to similar adjustments in other ongoing SEC actions against different crypto exchanges. Securities law expert James Murphy posited that many of these cases might either be dismissed or settled favorably for the defendants.
This potential shift has drawn negative reactions from some quarters, including Corey Frayer, a former SEC official, who remarked that delaying what seemed like a straightforward case against Binance while fostering a return to pre-FTX conditions for the crypto landscape is troubling for other ongoing litigation related to digital assets.
In response, Binance asserted that the SEC’s legal actions have “always been without merit” and commended Uyeda for his prudent strategy aimed at ensuring digital assets receive the necessary regulatory and legislative attention in this promising new epoch for blockchain technology, both in the U.S. and globally.
