Matteo Greco of Fineqia International comments on the $24 million SEC settlement of Bittrex, and compares it to the ongoing lawsuits involving cryptocurrency giants Coinbase and Binance.

Bittrex’s recent $24 million deal with the SEC mirrors the one that currently includes Coinbase and Binance, according to Matteo Greco of Fineqia International.

In two separate lawsuits, the SEC alleged that both Coinbase and Binance violated securities laws. Greco offers his view on how each company should proceed and whether Ripple Labs’ results bode well for cryptocurrency exchanges.

Bittrex settlement and Coinbase

Bittrex has settled accusations that it was giving US investors access to unregistered securities. Should Coinbase do the same?

Jericho: Settling with the SEC is always a good idea when possible. It allows you to avoid years of lawsuits and business uncertainty. Ripple Labs has shown how much the lawsuit has affected the company and its native token, XRP, over the past few years. Prior to Bittrex, Kraken also settled a not very different amount – $30 million – in connection with the same allegations.

Regarding Coinbase, although no monetary agreement was reached to settle the issue, the exchange is trying to be cautious and avoid further trouble with the regulator. In fact, after being sued, Coinbase immediately stopped signing bonuses in some US states. Coinbase is trying to cooperate and avoid further issues with the regulator, as the US market is key to its business. If there is a chance, Coinbase will likely settle with the SEC, as other secondary exchanges have done before it.

Binance’s petition against the SEC

What about Binance, which recently filed a petition against the SEC?

It’s difficult to comment on the matter without proper background knowledge, but the SEC certainly attacked Binance aggressively. It should be remembered that two months ago, the Securities and Exchange Commission (SEC) requested that all of Binance’s US assets be frozen, and the request was denied by a judge. The SEC claimed that the funds held by Binance US were not segregated and therefore mixed with Binance’s international funds. The regulator was unable to prove this point, and the judge dismissed their applications as inadmissible. It is possible that Binance will try to take advantage of this political win to strike back at the SEC and reduce the power of the regulator in its fight.

Navigating the challenging environment for Binance and Coinbase

How do Binance and Coinbase navigate this challenging environment in the future?

Binance and Coinbase’s situations are very different. Binance is a global exchange, and it is by far the largest in terms of market share. Despite the significant decrease in spot market share during 2023, Binance still holds more than 40% of the global spot digital asset market. Binance US has always represented a small market for the company, and the impact of the SEC lawsuit on business operations has been minimal. Binance US now has less than 1% of the US market share, but the exchange as a whole is still, without a doubt, the most important exchange for digital assets.

On the other hand, Coinbase has over 50% of the US market, and being able to operate there is crucial. Because of this, the approach and the prize at stake for the two exchanges here are definitely different, and so is the strategy for defending the position. Binance is now more focused on getting as many licenses as possible across Europe and the whole world – and there is seldom news about Binance US and the lawsuit filed before the SEC. In contrast, for Coinbase, the US market is an absolute priority. The exchange will make every effort to reach the best possible result.

Implications of Ripple’s decline for the cryptocurrency sector

The SEC intends to file an appeal against Ripple. What can the rest of the cryptocurrency sector take away from this decline?

This lawsuit could mark a milestone in understanding whether or not to classify digital assets as securities. If it is confirmed that retail sales on exchanges are not classified as securities, all other digital assets will follow this rule. If this happens, it will be impossible for the SEC to impose strong regulation on the digital asset market. Cryptocurrency companies will have a lot of freedom to raise funds through the secondary market.

It is also common for companies to apply for an exemption when selling securities to institutions. In this scenario, institutional and individual issuers of digital assets could be covered, leaving the SEC with almost no power in the matter. On the other hand, of course, the regulator claims that if asset sales are securities in some cases, they are still securities even when the retail tokens are sold on the secondary market.

Confirming the previous sentence would have a huge positive impact in the short term on the digital asset market, but at the same time, it could create gray areas in the long term, leaving room for potential flaws. Institutions want to operate with clarity, and the uncertainty of the rules may favor the market on the retail side but also slow TradFi institutions’ approach to the market. Either way, it is important for the final judge to line up how each type of sale was defined and considered, under what circumstances, and with strong, clear points that support the judgment.