Crypto pundits have speculated for years on the approach the US Securities and Exchange Commission (SEC) might eventually cement towards cryptocurrency. After posing regulatory challenges to other crypto organizations and their coins across the past few years, the SEC has now turned its attention to two of the largest cryptocurrency exchanges in the world.

The SEC accused first Binance, and now Coinbase, of operating unregistered exchanges and selling unregistered securities including Binance’s own crypto BNB and Binance USD (BUSD).

Binance is being sued for failing to restrict US customers from the exchange, and as per CBC, for misleading investors. The SEC complaint alleges that Binance secretly controls customer assets and that Binance has created separate US entities to avoid US securities regulation. Binance is already being sued by the US Commodity Futures Trading Commission (CFTC) and is under investigation by the US Justice Department for suspected money laundering.

For Coinbase, the exchange is accused of making billions by being a middle operator between crypto sellers and buyers, without offering the protection of conventional financial institutions like stock exchanges. The SEC says:

“Coinbase has for years defied the regulatory structures and evaded the disclosure requirements that Congress and the SEC have constructed for the protection of the national securities markets and investors.”

The expected outcomes for the industry are that these cases will set further precedent for regulators to clamp down on cryptocurrency businesses and that it will become more difficult to operate US cryptocurrency exchanges. Often companies that fall under the SEC’s eye make changes in their operations, pay fines, and move forward. Other companies have pushed back, fighting for the nascent cryptocurrency sector’s differences.

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Binance, per CoinDesk, responded with the following statement on Monday, adding that the cryptocurrencies “do not represent an investment contract,” and “as such are not securities.”

“We now join a number of other crypto projects facing similarly misguided actions from the SEC and we will vigorously defend our business and the industry.”

Coinbase’s Chief Legal Officer, Paul Grewal, also commented this week, saying:

“The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance.”

Potentially the impact for Binance will be more severe as the SEC has since requested an emergency order to freeze the US assets of the exchange, held across the globe. The order applies to two US holding companies, but not to its international exchange which is not US regulated.

The SEC’s controls ultimately depend on whether a cryptocurrency is classed as a security or not and this is often incredibly vague. Consensus is that Bitcoin (BTC) is not a security, by the simplest definition, because the coin acts as a currency rather than being a means to support a cryptocurrency project.

Thus far, the overall cryptocurrency market, which includes coins that are classed as securities and those that are not, has held relatively firm. There’s been no significant exit of investors though those betting with Bitcoin should remain aware of any price movements and any impact on their preferred cryptocurrency exchange.

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