The cryptocurrency market is on edge, and rightly so, since it involves the largest crypto exchange and the Commodity Futures Trading Commission (CFTC). The CFTC filed a lawsuit against Binance for the alleged violation of trading rules.
Based on the court filing, Binance violated provisions of a law affecting commodities that are meant to prevent money laundering and financial acts related to terrorism. Furthermore, the lawsuit contends that Binance employees and customers were instructed to work around these provisions, which corroborates with another report about similar acts to circumvent rules established in China.
“This filing is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years,” a Binance spokesperson told Blockworks via email correspondence. “Nevertheless, we intend to continue to collaborate with regulators in the US and around the world… to develop a clear, thoughtful regulatory regime.”
The news spilled over into other crypto-related stocks like digital currency exchange Coinbase. However, it could be the start of further downward pressure, unless Binance can escape the lawsuit relatively unscathed.
“Binance may choose to fight this but if the alleged facts are true, it will have a difficult time defending itself ," Blockinger told Blockworks in an email. “The issues are much less nuanced than current matters involving the SEC related to whether a particular token satisfies court-established precedent for what constitutes a security.”
Bitcoin Retreats on Latest News
The latest bitcoin rally was riding strong momentum prior to the latest CFTC news. Bitcoin pushed past the $28,000 mark before the lawsuit stifled that rally.
The leading cryptocurrency is still up over 60%, beating out other assets like the S&P 500 and gold. Bitcoin rallied further with the recent collapses in the banking system, reinvigorating its status as an uncorrelated asset with traditional financial instruments like stocks and bonds.
Nonetheless, the latest news surrounding Binance could also put downward pressure on bitcoin prices, and rightfully so, given its large market share in the crypto industry as a whole.
“Many knew Binance had a bullseye on its back, but this is still unnerving some crypto traders,” said Ed Moya, an analyst at Oanda. “Binance’s success is needed to ensure a good part of the cryptoverse can grow.”
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