It is “business as usual for Coinbase” as the cryptocurrency market waits for the exchange’s legal battle with the SEC to unfold over the coming months, possibly years. The Securities and Exchange Commission this week continued its crackdown on the cryptocurrency industry, filing a lawsuit against the world’s largest exchange, Binance, on Monday only to go after the largest US exchange, Coinbase, the next day. The agency alleged that Coinbase was operating as an unregistered exchange, broker, and clearing agency, and that its staking software violated securities laws. Coinbase shares are down more than 17% over the course of the week. Bitcoin rose more than 3% between Tuesday and Friday, according to Coin Metrics and has largely held back its gains. Ether also rallied but didn’t end the week on a strong note. Many hope that the lawsuit will bring some much-needed clarity about how crypto companies operate in a compliant manner. The outcome could either lay some foundations for the young industry to thrive or in the worst case scenario, drive it out of the United States altogether. In the meantime, here’s how cryptocurrencies reacted to the news this week: Altcoin prices slumped while bitcoin and ether got a little boost There was more bloodshed in altcoin land after the SEC designated several coins it said could be considered securities Finance. Among them are notable projects like Solana and Cardano, whose coins lost 12% and nearly 14% between Tuesday and Friday, according to Coin Metrics. Polygon Token is down 12% and Axie Infinity is down 9%. Jefferies noted in a note this week that the signals provided some clarity on the SEC’s view of what should be considered a security. They are all able to be bought or sold for a consideration, trade at the same price as another unit of the same asset, are equal in value to any other token, and give investors no special rights not available to other investors in that asset. The market capitalization of cryptocurrency “securities” decreased, and CryptoQuant’s “securities” index fell about 14% after the lawsuit, while the market capitalization of bitcoin and ether remained essentially flat. JMP noted that in “securities,” bitcoin and ether, which accounted for 55% of Coinbase’s Q1 trading volume, were excluded from “securities.” “Coinbase has also been steadfast in its view that the assets listed on its platform do not fall within the scope of current securities law, and we note that other agencies (including the CFTC) and many lawmakers have different opinions on this issue as well,” the company said in a note this week. “Accordingly, we expect this to represent the core thread of the issue and the key existential question for Coinbase’s business.” Coinbase outflows from crypto ‘securities’ outflows — the amount of coins withdrawn from exchange wallets — and reserves at Coinbase rose for a number of coins named in SEC complaint on the day of the lawsuit, and sometimes the day before, when the agency sued Binance and listed some of the same tokens, according to CryptoQuant.Coinbase saw an outflow of about 20 million tokens to Polygon on Tuesday afternoon, trading at about 73. cents by the end of the week. Popular gaming token Axie Infinity, which is trading at around $6, saw outflows of around 32,000 coins on Monday afternoon. Meanwhile, sports and entertainment currency Chili’s saw outflows skyrocket on Mondays, Tuesdays and Wednesdays. DeFi token Voyager saw a significant increase on Monday and then again on Friday.
Bitcoin and ether have held steady this week while altcoins are faltering in the SEC’s Coinbase crackdown
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