7th June 2022 > > Binance coin (BNB).

tl;dr

Binance might be falling foul of the US authorities.

Market Snap (at time of writing)

Market Wrap

Not much has changed since we last spoke, but I note that BTC briefly topped $32k during the Jubilee celebrations. With 10 year treasuries once again above 3% the outlook for all risk assets is a little less than rosy.

Keep an eye on that perpetual futures funding rate – an uptick in the price of BTC might easily turn into a massacre of the leveraged shorts, adding upward price pressure.

Curious Cryptos’ Commentary – Binance Coin (BNB)

In 2017, Binance, the world’s largest centralised cryptocurrency exchange (CEX), announced an initial coin offering (ICO) for its native coin BNB.

With a market cap of $46bn BNB is the 5th largest crypto with a current market price of $283.

2017 was the year of the ICO – vast amounts of money were raised, some of it in support of successful coins, some of it in support of ones that failed, and inevitably, some of it went into scam coins.

At the time there was no significant response from any of the regulators, but increasingly the U.S. Securities and Exchange Commission (SEC) has been getting involved. Ripple Labs. have been battling with the SEC for 2 years or more now about whether Ripple (XRP) is a security or not.

This may seem like an arcane discussion of little relevance to you and I, but I suggest otherwise. If a crypto is defined as a security, then an ICO would need to be registered with the SEC before launch.

Failure to adhere to securities laws in the US is a quick route to huge fines and potential imprisonment – targeted and appropriate legislation that makes the US one of the most attractive places for incoming investment cash.

The SEC has announced an investigation into whether BNB is a security or not.

The implication of this investigation is that if the SEC determines that BNB is a security, then Binance Holdings Ltd. is going to fall foul of the rule that the ICO for BNB should have been registered with the SEC but clearly wasn’t.

I suspect that the investigation is going to take a few years or more to complete. If BNB is deemed to be a security, then a key part of the penalty determination process will be an assessment of Binance’s co-operation with regulators before and during the investigation.

Regular readers already know the Binance as a firm is led by Changpeng Zhao, an individual who is proud of his publicly stated desire to avoid all regulations, though he has been moderating that stance somewhat in recent months as Binance looks to finally establish a registered head office, a move that is dear to the hearts of all regulators.

It is my considered view that you should never keep more than 10% of your crypto holdings across all CEX, and preferably less than that.

Given the dominant position that Binance has in the CEX market, that advice in the light of this investigation by the SEC becomes ever more urgent.