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John Reed Stark, a nineteen-year veteran former attorney in the United States Security and Exchange Commission’s Enforcement Division and former SEC Office of Internet Enforcement chief, has warned to “get out of crypto platforms now.”

The SEC sued Binance Holdings Ltd. and CEO Changpeng Zhao on June 5. The following day, the regulator sued crypto exchange Coinbase for allegedly violating securities laws. On this basis, Stark issued his warning.

“My take is that the SEC is spot-on with their crypto-related enforcement efforts,” Stark tweeted, claiming: “No matter what the carnival barkers promise, it is axiomatic that crypto trading platforms are high-risk, perilous and inherently unsafe.”

“Crypto trading platforms are under a U.S. regulatory/law enforcement siege which has only just begun,” he added.

Crypto operation in a vacuum

Stark explained that his belief stems from a lack of registration with the SEC, which directly correlates to a lack of operational supervision and a severe lack in customer protection.

“There is not just a gap in customer protections, but a chasm,” he claimed, citing that crypto exchanges have a lack of record-keeping as well as requirements for pricing or order flow. Plus, he claimed they have no inherent reason to obey U.S. statues and rules against market manipulation, insider trading, trading against customers and other negative behaviors.

Stark also argued that there are no mandated cybersecurity or privacy protection requirements, no internal compliance obligations, no mandated requirements for dealing with customer complaints and no minimum financial standards for operation.

Users are already leaving centralized exchanges

Even before the SEC sued Binance and Coinbase, crypto trading volumes had declined sharply on centralized exchanges — indicating decreasing interest in trading on centralized entities.

According to The Block Research’s Legitimate Volume Index, May saw centralized exchanges post $307.4 billion in volume — a decline of 23.2% from April and the lowest monthly volume since November 2020.

Decentralized exchange volume, meanwhile, saw a modest increase from $60.52 billion in April to $67.51 billion last month.

© 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 Solana Foundation explicitly “disagrees” with the United States Securities and Exchange Commission’s characterization of Solana’s native coin, SOL, as a security.

The U.S. securities regulator called SOL and 11 other cryptocurrencies securities in its high-profile lawsuit against the world’s largest crypto exchange, Binance, on June 5.

Though the Solana Foundation categorically disagrees with SOL being called a security, the non-profit organization dedicated to stewarding the Solana network claims it “welcomes the continued engagement of policymakers as constructive partners on regulation to achieve legal clarity on these issues for the thousands of entrepreneurs across the U.S. building in the digital assets space.”

SOL is trading flat on the day after a weekly decline of more than 26%.

The price of SOL is down more than 26% over the past week. Source: TradingView

As The Block reported on June 9, fintech trading app Robinhood will remove support for SOL — as well as Polygon’s MATIC and Cardano’s ADA — on June 27.

© 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.

Crypto tax and compliance startup TaxBit has reportedly let go of 80 employees — or nearly 40% of its staff.

The latest cuts — which follow a 15% staff reduction in December — were confirmed by The Information, which spoke to a TaxBit spokesperson and people familiar with the matter.

As The Block reported in August 2021, TaxBit hit unicorn status after raising $130 million in a Series B funding round co-led by venture firms Insight Partners and IVP. Other investors included Tiger Global, Paradigm, 9Yards Capital, Sapphire Ventures, Madrona Venture Group an Anthony Pompliano.

At the time of its Series B, the company said it was looking to “at least double” its team of 80 people — the same amount that was just let go.

According to The Information, employees were informed of the staff reduction on Thursday. CEO and co-founder Austin Woodward also stepped down and was replaced by former Intuit executive and TaxBit COO Lindsey Argalas on the same 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.

Polygon Labs has responded to the United States Securities and Exchange Commission’s claims that MATIC is an unregistered security.

After stating that the token was “developed outside the U.S., deployed outside the U.S. and focused to this day on the global community that supports the network,” Polygon Labs claimed that “MATIC was a necessary part of the Polygon technology from Day 1, ensuring that the network would be secure — and remains so to this day.”

The development and growth team for the Polygon blockchain also said its actions “did not target the U.S.” while ensuring MATIC was “available to a wide group of persons.”

The price of MATIC has declined nearly 2% on the day after dropping more than 33% over the past week.

The price of MATIC is down more than 33% over the past week. Source: TradingView

SEC names specific coins and tokens as securities

Polygon Lab’s comments follow MATIC’s delisting from fintech trading app Robinhood, which also removed support for Solana’s SOL and Cardano’s ADA — a result of the SEC’s labeling of specific coins and tokens as securities.

In its lawsuit against Binance, the world’s largest crypto exchange, the SEC explicitly called MATIC and 11 other tokens securities.

Binance USD, BNB, Solana’s SOL, Cardano’s ADA, Filecoin’s FIL, Cosmos Hub’s ATOM, The Sandbox’s SAND, Decentraland’s MANA, Algorand’s ALGO, Axie Infinity’s AXS and Coti’s COTI were also labeled securities by the regulator.

© 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.

Binance has been ordered to stop operating in Nigeria by the country’s markets regulator.

“Binance Nigeria Limited is hereby directed to immediately stop soliciting Nigerian investors in any form whatsoever,” said Nigeria’s Securities and Exchange Commission (SEC), according to Reuters.

The regulator added that the exchange’s local operations are unregistered and unregulated.

Binance has a sizeable community in Nigeria, with a 64,000-strong Telegram community and an announcements channel dedicated to the region.

In May, Nigeria’s markets regulator published 54 pages of regulations for digital assets. The regulations spelled out rules for issuing digital assets and classified them as securities to be regulated by the SEC. They also included registration requirements for digital asset offerings and custodians, as well as rules for digital asset exchanges.

Binance did not immediately respond to a request for comment.

© 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.

TrueUSD, issuer of TUSD, has paused minting of the stablecoin through Prime Trust until further notice. It can still be minted and redeemed through other financial services.

Las Vegas, Nevada-based Prime Trust is currently in the works of being acquired. BitGo Holdings said it has signed a non-binding term sheet to acquire 100% of the equity of Prime Core Technologies, the parent company of crypto custodian Prime Trust. BitGo said the deal would bring business continuity and long-term stability to the financial firm’s clients.

The TUSD stablecoin has peaked in popularity since getting adopted by Binance, in the wake of regulatory trouble for its associated BUSD stablecoin. The Bitcoin:TUSD trading pair is currently the highest pair on Binance by trading volume. That said, its $2 billion market cap is still small compared to major stablecoins like USDT and USDC.

Stablecoins are kept to their pegs through a minting and redemption process. If the price is above peg, large holders can directly swap dollars for the stablecoin and sell on the open market. Conversely, if the price goes below the peg, such entities can buy the stablecoin on the open market and redeem it directly. Yet these require financial partners like Prime Trust, who can handle the fiat payments.

Prime Trust offers various developer tools and APIs to crypto companies, including for custody, payment rails, compliance, liquidity and settlement.

© 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.

Collapsed exchange FTX’s customer list can remain permanently sealed, a judge ruled on June 9, after debate over how the list can return value to investors.

Delaware Judge John Dorsey ruled that the list counts as a trade secret, according to the Associated Press, and keeping the list secret will help protect creditors from harm.

“It’s the customers that are the most important issue here,” the judge said, according to AP. “I want to make sure that they are protected and they don’t fall victim to any types of scams that might be happening out there.”

FTX customers will have their names permanently shielded. This will, however, exclude customers in the UK and those covered under General Data Protection Regulation rules. The judge extended the secrecy around institutional clients for another 90 days.

The value of the customer list

FTX lawyers and supporters had argued that the list would help FTX be more attractive in the event of a sale or investment into the company.

Kevin Cofsky, partner at investment bank Perella Weinberg Partners — which is tasked with exploring restructuring and capital market opportunities for FTX Group — had described the list as “extraordinarily valuable.” He added that if the customer list was released then it would damage the value that could be recovered for creditors.

On the other side, the U.S. bankruptcy trustee and media outlets had argued that the customer list should be released, with the latter arguing this would be in the public interest.

© 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 crypto market fell significantly this morning, with a wide range of altcoins hit heavily.

The biggest losses in the top 100 cryptocurrencies by market cap were EOS, Polygon and Dash — each down between 24% and 25%.

Higher ranking coins were similarly affected — such as Cardano, down 23%, and Solana, down 20%.

The price of EOS fell sharply this morning. Image: CoinGecko.

Many of the tokens that fell the most were also named as securities in the recent lawsuits by the Securities and Exchanges Commission against crypto exchanges Coinbase and Binance. These included Polygon, Cardano, Solana, Dash and The Sandbox.

Bitcoin and Ether, the two largest cryptocurrencies by market cap, were less affected but still saw 3% and 5% declines, respectively.

Binance CEO Changpeng Zhao dismissed one reason for the market crash on Twitter today. He pointed to commentators that had claimed Binance converted its crypto holdings to fiat. He said instead that the exchange’s stablecoin reserves — used to pay salaries and expenses — had decreased and that its crypto reserves had increased.

© 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.