The United States Securities and Exchange Commission (SEC) has just declared a number of top digital currencies as investment contracts and as such, unregistered securities.
The claim was made in the recent lawsuit it filed against Binance Exchange and the cryptocurrencies it listed include Binance Coin (BNB), Binance USD (BUSD), Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS) and COTI.
Many hypotheses are ongoing in the industry following the Binance crackdown and declaration with speculations of lawsuits similar to that of XRP likely. While this assumption is hard to predict, here are three other possible aftermaths of this move by the SEC on the named assets.
Sustained Price Plunge
A sustained price plunge remains the first and most distinct impact of the securities designation on the aforementioned tokens. The news has riled up the tokens with BNB, the central crypto featured in the lawsuit dropping by 9.92% to $275.64.
All of the cryptocurrencies named have also recorded sustained price plunges with Cardano down by 8.06% and Solana down by 9.70%. Depending on the next steps from the market regulator, we may see a prolonged crypto winter for these digital currencies moving forward.
This is arguably one of the most troubling possible aftermath of the designation of the 12 digital currencies as securities. Exchanges operating in the United States which represents the most important market to date for crypto may start delisting the assets as they will not want to be caught in between the regulatory uncertainty.
Interestingly, these tokens are major digital assets with a significant number also trading on Coinbase, Kraken and other US-based trading outfits. With the SEC very bold about its stance, exchanges may take the initiative to delist the assets before they themselves are sued.
There is a precedence for this as many of the exchanges delisted XRP when the legal battle between Ripple and the SEC commenced back in December 2020.
Exit of Major Partners
The position of the US SEC to proscribe these cryptocurrencies as securities may also affect their partnerships moving forward. Many big brands that are exploring avenues to enter the Web3.0 world through partnerships with these major crypto projects are doing so with no potential regulatory baggage. With the SEC likely to go after these tokens individually in the future, most of these protocols may lose their partnerships in the near future.
While this assumption is a mere speculation, the XRP case also served as a precedent when Ripple Labs lost its US payment partner Moneygram International at the time.
Changpeng “CZ” Zhao, the CEO of Binance has called for unity in the industry to help usher in a more functional regulation that can help power the crypto ecosystem in the US. With the exchange reiterating its plans to defend itself against the SEC’s allegations, market observers are currently staying safe and exiting their positions as showcased in the ongoing price slumps.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.