U.S. Court Directs SEC and Binance to Clarify Crypto Regulations
According to Coindesk’s latest update, a U.S. federal judge has directed the Securities and Exchange Commission (SEC) and Binance’s legal team to engage in further discussions concerning limitations on the company’s operations. The judge has set a Thursday deadline for both parties to provide an update on their negotiations.
During this period, Binance.US will be allowed to continue its business activities while working towards reaching an agreement with the regulator on imposed restrictions.
If mutually agreed limits are established, Judge Amy Berman Jackson of the D.C. District Court stated that a restraining order would not be necessary.
In the interim, the judge has directed Binance.US to submit a list of its business expenses to the court and mandated ongoing negotiations between the involved parties. A status update is required by the end of business on Thursday.
During the court proceedings, the judge expressed frustration with the responses provided by the SEC attorneys regarding their motion to freeze Binance’s assets. She specifically inquired about any instances where customer funds from Binance.US had left the United States. The SEC attorneys primarily expressed concerns over the control of private key shards on Binance’s global platform, including those held by Changpeng “CZ” Zhao.
“I want to know if it’s happening or not,” she said. “It’s stunning that I’ve asked each of you this.”
An SEC lawyer, Jennifer Farer, did make a statement to the judge on Tuesday, “we are open to the business continuing to operate.”
“There’s a back-and-forth about whether they’re shutting down or not shutting down,” Farber said.
However, Judge Jackson remarked that by the end of the day, the parties involved were not significantly distant in their positions. She expressed that if they could reach an agreement, it would provide ample time for all parties to thoroughly address the intricacies of the case.
Last week, the SEC filed a lawsuit against Binance, Binance.US, and Binance founder Changpeng “CZ” Zhao, alleging their operation as an unregistered securities exchange, brokerage, and clearing agency. The regulator also claimed substantial mingling of funds, enabling Zhao, a Canadian national residing in the UAE, to access Binance.US customer assets.
We covered this in an article here.
Following the lawsuit, the SEC filed a motion for a temporary restraining order.
In response to the motion, the cryptocurrency exchanges refuted the allegations, contending that the SEC had not definitively established the listing of any securities and asserting the regulator’s failure to present compelling evidence to support an emergency motion.
Judge Jackson delved into the fundamental question central to the lawsuit, exploring the criteria that determine whether a crypto asset qualifies as a security or, if not, whether it should be considered a commodity.
While posing some basic inquiries on the matter, the judge expressed dissatisfaction with the responses provided.
At the start of the hearing, she specifically requested the SEC attorneys to clarify the distinction between a “crypto asset” and a “crypto asset security.”
SEC attorney Matthew Scarlato informed the judge that the regulator had presented numerous instances of cryptocurrencies it deemed to be securities in the comprehensive complaint. However, he mentioned that the SEC also retained the right to evaluate the remaining tokens on the exchanges at a later stage.
Subsequently, the judge inquired from both the SEC and Binance whether the remaining cryptocurrencies could be classified as commodities.
“The ones you’re not calling securities, what are they?” she asked, diving into the heart of an issue that’s vexed the crypto industry for years.
She later asked Matthew Martens, an attorney representing Binance.US, if BNB is a commodity since the company had argued it was a security.
“It is a crypto asset,” Martens said.
