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27
Jun
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6/27 News Roundup: Binance, Coinbase, Blackrock, Ripple, and Ethereum

The SEC sued both Binance and Coinbase in June. The world’s largest asset manager, Blackrock, submitted a Bitcoin spot ETF application. The Hinman documents didn’t become a massive asset to Ripple’s legal battle. Ethereum’s next hard fork will take place at the end of 2023.

The SEC sued Binance

The biggest news of June was seen in the first week of the month. The SEC, which oversees the US securities market, sued Binance and its founder, Changpeng Zhao. The news was first reported by Bloomberg.

The US crypto industry has been aggressively attacked by the SEC in 2023. You can find more stories on the subject from our previous news articles. Given this background, the attack on Binance did not come as much of a surprise to those following the industry.

The SEC accuses Binance of illegal securities trading in the United States, among other things. Some of the cryptos traded on Binance are therefore securities in the opinion of the SEC, and in addition, the SEC accuses Binance of also allowing US persons to trade on the platform.

There are 13 different charges as a whole, and they are an order of magnitude more serious than what has been seen in similar challenges. However, it is good to remember that these are only accusations, which Binance will give its own response to. Binance has an army of laywers to defend the company in court, so the processing of the case can take even years in the worst case.

There is also a separate Binance US exchange in the United States, which was established a couple of years ago to serve American customers. Binance US is a separate company compared to Binance.com, but it has also come under fire from the SEC.

The SEC even tried to get a court order to freeze Binance US’s assets. However, the judge did not accept such speculation without evidence, so Binance US continues to operate as normal.

It seems that the SEC wants to drive the Binance US exchange out of the country. Earlier this year, it also blocked a deal in which Binance US would have bought the bankrupt Voyager exchange. That deal would have been a very good thing for customers.

It is also good to note that the named 10 new cryptocurrencies that it considers to be securities. These are BNB, BUSD, SOL, ADA, MATIC, ATOM, SAND, MANA, AXS, and COTI. The price of the cryptocurrencies in question fell significantly after the news.

Binance has continued to operate as normal despite the SEC charges.

The SEC also sued Coinbase

Let’s continue with regulatory topics. In June, Coinbase also came under fire from the SEC. Interestingly, the SEC announced that it had sued Coinbase just a day after attacking Binance. The timing was certainly no coincidence.

The cases of Binance and Coinbase are quite different, although they share the same elements. The charges against Binance are significantly more serious and extensive. Coinbase’s case is essentially about the same old topic that SEC boss Gary Gensler has been talking about all year: are cryptos securities or not.

According to SEC, Coinbase has engaged in illegal securities trading. This means that some of the cryptocurrencies offered by Coinbase are securities in the SEC’s opinion. Here is what the SEC tweeted about the case.

In the previous news, we told how the SEC named 10 cryptocurrencies classified as securities. In the case of Coinbase, there are 13 cryptos listed: ADA, AXS, MATIC, SAND, SOL, CHZ, DASH, FIL, FLOW, ICP, NEAR, NEXO and VGX. Many of the readers surely noticed that some cryptos (e.g. ADA, MATIC, SOL) are named in both cases.

Some XRP fans have celebrated on social media that XRP has not been named as a security in these cases. However, this is not a victory, as the SEC already designated XRP as a security in December 2020, when it sued Ripple.

Coinbase plans to defend itself like Binance. Coinbase also has huge funds for the legal battle, so the SEC will not get a forfeit from this attack either.

As for cryptocurrencies designated as securities, the stamp given by the SEC is not yet a legally binding judgment. Cryptocurrencies only get the status of a security through a legal process. For example, the status of the XRP token has been fought in court for more than 2.5 years.

Coinbase has not removed any of the aforementioned cryptos from its offering. Though, Robinhood and eToro are examples of crypto exchanges that have reacted and removed many of the previously mentioned coins from their services.

SEC challenges can have significant reputational damage to the cryptos mentioned in them. Especially some institutional investors may avoid investing in such coins.

Blackrock seeks approval for Bitcoin spot ETF

Last week, we received surprising news from the United States, which also caused the price of Bitocin to rise. The world’s largest asset manager, Blackrock, announced that it is seeking approval from the SEC for a spot Bitcoin ETF!

Blackrock’s AUM (assets under management) has already broken the 10 trillion dollar mark. If a company of this weight class decides to apply for approval, it can be considered almost a certain success. The balance of Blackrock’s ETF applications is quite convincing: 575 approvals, 1 rejection.

The news sent Bitcoin’s price up nicely last week. The price rose from around $26,500 to $30,000 in one day.

It is important to highlight the following detail about Blackrock’s application: it is a spot Bitcoin ETF that has not been previously approved in the United States. A futures-based Bitcoin ETF has already been approved in the United States, but it is mainly suitable for short-term trading.

A spot ETF means that Blackrock has to buy bitcoins from the market (and hold them) on behalf of the investors. A funny detail is that Blackrock’s partner is Coinbase, which has been sued by the SEC. And that’s not all. In addition to Blackrock, several other large-scale investment companies have filed a spot Bitcoin ETF application with the SEC.

https://twitter.com/Ashcryptoreal/status/1672531504411410434

It is interesting that the SEC first attacks the largest crypto exchanges in the industry, and two weeks later TradFi firms are rushing to seek approval for Bitcoin ETFs. In this situation, it would be very surprising if Blackrock’s application was rejected. You might the the paperwork is done only if they have got preliminary approval from the SEC behind the scenes?

A Bitcoin spot ETF would definitely be a good thing in terms of Bitcoin’s price development. Although the United States is just one country, its financial sector is gigantic compared to other nations. We will probably hear SEC’s decision in a couple of months.

Ripple vs. SEC: Hinman documents released

The Ripple vs. SEC lawsuit just keeps going. Now it has been more than 2.5 years since the SEC sued the leaders of Ripple (Chris Larsen & Brad Garlinghouse) and determined that the XRP token is a security.

So far we haven’t seen any major drama, and predicting the winner still feels like lottery. However, a significant step was taken in mid-June, when the so-called The Hinman documents were made public.

William “Bill” Hinman is a former director of the US Securities and Exchange Commission’s (SEC) Division of Corporate Finance. Hinman worked at the SEC from 2017 to 2020. Hinman has become famous for a speech he gave in 2018 where he commented that Bitcoin and Ethereum are not securities.

Ripple has been trying to get the SEC’s internal documentation and commentary (including emails) made public for almost two years. Now the Hinman documents have been released. This is how Brad Garlinghouse commented on the situation:

Ripple fans have been waiting for this day for a long time, and many believed that the Hinman documents would bring a boost to Ripple’s legal proceedings and the price of the XRP token.

The price of XRP rose by a good five percent after the news was published, but the price fell to a clearly lower level the very next day. XRP is still about 86 percent below its January 2018 ATH.

It seems that the impact of the Hinman documentaries will be thin in the end. The SEC can state that Hinman acted against the agency’s general opinion, meaning, he went solo. The documentation shows that Hinman’s speech received criticism from within the agency even before it was delivered.

The case mainly gives a bad image of the SEC to the outside world, but it hardly gives Ripple any significant help.

Ethereum’s Dencun hard fork

The Ethereum development team has locked down the content for the next hard fork. The update in question has been named Dencun, and it will take place during 2023.

Many our followers surely remember The Merge and Shapella updates that have taken place in the past 12 months. They have been significant for Ethereum’s infrastructure, but have not improved Ethereum’s transaction capacity.

The Dencun update includes five EIPs (Ethereum Improvement Proposal):

  • EIP-4844: Proto-danksharding
  • EIP-1153: Reduces the cost of storing data on the blockchain
  • EIP-4788: Improvement to bridges and stake pools
  • EIP-5656: EVM code improvements
  • EIP-6780: Remove code that can destroy smart contracts

At the core of the update is the EIP-4844, commonly known as Proto-danksharding. The name comes from two Ethereum developers who came up with the idea: Protolambda and Dankrad Fei. Sharding is Ethereum’s scaling technology, so EIP-4844 is a step towards sharding.

EIP-4844 utilizes data blobs, which can be used to easily and cost-effectively validate Layer 2 data in the Ethereum blockchain. These data blobs are also automatically deleted after 1-3 months. With EIP-4844, Layer 2s such as Arbitrum and Optimism can lower their transaction costs significantly.

The scaling of Ethereum is progressing strongly with the help of Layer 2s. In the future, the actual Ethereum blockchain will only be an anchor for the security of the entire ecosystem and is intended for significant value transfer – not for micropayments. DeFi apps, games and other applications will be used mostly at Layer 2 levels, where transaction costs are almost zero.

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