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Binance.US claims in a new court filing that it has “made significant efforts” to cooperate with a Securities and Exchange Commission investigation since December 2020.

That timeline tracks with the investigative timeline laid out by the SEC last week. But the agency argues that Binance.US has not provided “reassuring” answers regarding where customer assets are stored.

Monday’s filing by Binance.US is the U.S. affiliate’s first pushback to claims by the SEC that it and its parent company redirected over $12 billion in customer assets to funds controlled by owner and founder Changpeng ‘CZ’ Zhao, in an echo of similar allegations raised against Sam Bankman-Fried, FTX, and Alameda Research.

Responding to the SEC’s allegations that it commingles customer assets with funds controlled by Zhao, lawyers representing Binance.US’s parent company, BAM Trading, responded that it “maintains its customers’ fiat currency in segregated accounts maintained with its banking partners, separate from any corporate funds.”

The company acknowledged that Zhao owns BAM Trading’s bank account but claims he does not have signatory authority over the account. The SEC argues that Zhao is one of the people with control over those bank accounts and says it’s proof of a lack of separation between Binance and Binance.US, both of which he’s believed to own a controlling stake in.

The filing pushing back on SEC claims comes in preparation for tomorrow’s hearing on a temporary restraining order on Binance.US requested by the SEC that would effectively freeze the U.S. affiliate’s assets except for customer withdrawals.  

The SEC also wants Binance and Binance.US to provide a full accounting of their financial health. 

This is a developing story.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Jeremy Allaire, the CEO and co-founder of stablecoin issuer Circle, will use scheduled testimony on Tuesday at a U.S. House Financial Services Committee Hearing to urge lawmakers to defend the primacy of the U.S. dollar and pass stablecoin legislation he said will help keep the currency competitive on a global scale. 

“The dollar is at a crossroads,” Allaire said in written testimony, pointing to what he said are “rapidly evolving geo-economic and geo-political blocs” that are putting pressure on the dollar-based global financial system.

“Dollar primacy allows the US to weather economic and financial shocks (as the dollar strengthens in times of crisis) and exert global influence far more than other countries,” he added.

Allaire pointed to strides China has been making with a digital yuan and said a stablecoin bill would be a crucial piece of legislation to keep the U.S. currency at the forefront of the global financial system.

In April, the House Financial Services Committee released a new discussion draft bill that would regulate stablecoins in the country. 

Stablecoin legislation should be a ‘national priority’

“Delivering a bill to President Biden’s desk should be a national priority,” Allaire said, noting recent efforts in European Union, Japan and Hong Kong to regulate U.S. dollar stablecoins. “Other nations are enacting laws to regulate the use of the US dollar.”

Allaire said he believed there should be nationally-established standards for state and federally licensed issuers. He also called for “tailored and limited rights” for stablecoin issuers to access basic Federal Reserve account services. 

“This would facilitate more timely satisfaction of redemption requirements, enhance financial stability, and protect consumers without providing access to the discount window or other financing programs afforded only to banks,” he said, arguing that financial intermediaries for stablecoins should be required to hold them at qualified custodians that can include trust banks.

Finally, Allaire called for criminal penalties for companies that knowingly issue false digital dollars. 

“I believe civil penalties alone are woefully insufficient to dissuade those who will have tremendous economic incentives to flout US law and undermine the dollar’s credibility at home and abroad,” he said.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The largest cryptocurrency held its perch where it spent much of the previous three days.

A Securities and Exchange Commission (SEC) Monday effort to freeze Binance.US’s funds is a “draconian and unduly burdensome” move, the U.S. affiliate of the global crypto exchange argued Monday.

Huge increase in supply could hurt BLUR’s price. The token has also fallen after SEC labeled other tokens as securities.

Binance.US, the U.S. entity of crypto exchange Binance, has added four lawyers from Milbank LLP to its legal team including George Canellos, a former co-director of the Security and Exchange Commission’s enforcement division.

Canellos oversaw about 1,300 attorneys at the SEC and was also chief of the major crimes unit at the U.S. Attorney’s Office in the Southern District of New York, Bloomberg News reported. The move came as the crypto exchange faces a lawsuit filed against it last week by the regulator.

“Binance is clearly preparing for a criminal prosecution and continuing to hire the best defense attorneys in the world,” John Reed Stark, a former SEC Office of Internet Enforcement Chief, said on Twitter.

Other Milbank lawyers added to the team include Adam Fee, Matthew Laroche and Andrew LeBlanc. The firm didn’t immediately respond to a request for comment from The Block. 

In a June 5 lawsuit, the SEC alleged major malfeasance and legal violations that it argues should result in prohibiting the company from doing further business in the country. 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Republican lawmakers took a shot at the U.S. Securities and Exchange Commission Chair Gary Gensler on Monday, announcing proposed legislation that would seek to remove him. But they’d need bi-partisan support for it to pass the Senate. 

House Majority Whip Tom Emmer, R-Minn., a longtime proponent of digital assets, joined the introduction of Rep. Warren Davidson’s so-called “SEC Stabilization Act” that aims to restructure the Securities and Exchange Commission and remove Gary Gensler as Chair.

“American investors and industry deserve clear and consistent oversight, not political gamesmanship,” Emmer said in a statement. “The SEC Stabilization Act will make common-sense changes to ensure that the SEC’s priorities are with the investors they are charged to protect and not the whims of its reckless Chair.”

Davidson, R-Ohio, sits on the House Financial Services Committee and has been a longtime advocate for crypto within Congress. The SEC and its Chair have drawn criticism from the crypto industry after a series of high-profile enforcement actions and lawsuits this year. 

‘Tyrannical Chairman’

“U.S. capital markets must be protected from a tyrannical Chairman, including the current one,” Davidson said in the statement. 

The proposed legislation would adjust the commission to include a sixth commissioner, and a single political party would not be able to hold more than three commissioner seats at a given time.

It wasn’t immediately clear if the bill had any support in the Senate, which Democrats currently control.

 

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Federal Reserve’s latest rate hike decision and U.S. inflation data are among key upcoming items.

Bitcoin and ether both started the week in the red, declining 0.6% and 1%, respectively, according to TradingView. The price of the biggest cryptocurrency by market capitalization fell to $25,785 at 2:07 p.m. on Monday in New York, while ether declined to $1,735.

Hernán Yellati, Head of Global Macro Research at crypto research firm CTF Capital, said a volatile week was ahead, with no clear direction in the near term. 

While both bitcoin and ether held up fairly well after the U.S. Securities and Exchange Commission sued crypto exchanges Coinbase and Binance last week, he noted that several alt coins suffered sharp losses after the regulator said they qualified as securities. 

SEC crypto saga continues 

“The saga between the SEC vs. crypto has intensified as market participants and lawmakers are criticizing SEC Head Gensler of regulating by enforcement and risking the US as a technological and innovation hub,” he wrote Monday in an emailed note. “Meanwhile, other jurisdictions like Hong Kong are inviting US based companies to apply for license and operate out of their jurisdiction.”

Yellati said that markets will be watching May inflation data due to hit tomorrow and then a Federal Research interest rate decision scheduled for Wednesday.

“We expect a pause in the hiking cycle, leaving the door open for data dependent moves in the future,” he wrote. “The CPI tomorrow will be a key piece of the puzzle going into the FOMC decision the next day.”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.