Key Takeaways  

• SEC targets Binance.US and Coinbase with alleged securities violations
• WorldPay’s head of crypto and web3 sees the lawsuits as an attack on crypto
• Crypto exchanges and businesses ponder U.S. exit

Worldpay’s head of crypto believes the U.S. SEC’s lawsuits against Binance.US and Coinbase are a shot across the bow of the wider cryptocurrency ecosystem.

The United States Securities and Exchange Commission (SEC) is suing Binance.US and Coinbase for alleged securities violations relating to a number of listed cryptocurrencies. The enforcement action could stifle innovation and lead to an exodus of crypto-related businesses from the U.S., according to industry insiders.

Cascading Effect

The SEC caused ructions across the American cryptocurrency ecosystem in June 2023 as it filed lawsuits against Binance.US and Coinbase for what it has deemed as unregistered securities offerings being offered by both exchange operators.

The two exchanges are facing a litany of charges by the U.S. regulator which in turn is creating a cascading effect of uncertainty and fear for the wider cryptocurrency space in America. 

Aside from the direct impact on cryptocurrency markets, which slumped in early June in the wake of the SEC’s announcement of legal proceedings, industry experts have highlighted the possibility of an exodus of cryptocurrency-related businesses amid an unfriendly regulatory environment in America.

A Lawsuit Against Crypto

Nabil Manji, head of crypto and web3 at Worldpay from FIS, believes the SEC’s action against Binance.US and Coinbase could have wide-reaching ramifications for the cryptocurrency industry in America.

Speaking to CCN at Money 20/20 in Amsterdam, Manji highlighted the potential for the SEC’s lawsuit to set a negative precedent for cryptocurrency tokens in the U.S. While steering clear of the merits of the SEC’s charges, Manji was more concerned about the implications for the myriad of digital assets offered by American-based exchanges.

“What was interesting is that the SEC had this section where they listed 10 different crypto assets and wrote a page on each about why it passes the Howey Test and why it’s a security,” Manji said.

A preface added that a single securities violation by just one cryptocurrency listed on an exchange would be enough to institute legal proceedings against U.S.-based  exchanges.

“They’re like, ‘here’s 10 examples of why we think they’re a security’ and my reaction was this is a kind of lawsuit against crypto.”

As Manji explained, Worldpay partnered with Coinbase back in 2013 to allow the exchange to become the first to accept fiat-based card payments worldwide. At the time, conventional bank wire transfers to exchanges were a reality, but exchanges were yet to offer bank card payment options to buy cryptocurrencies.

Worldpay, which was acquired by American multinational FIS in 2019, now serves a number of the world’s most prominent cryptocurrency exchanges as a fiat on and offramp as the infrastructure provider to a plethora of payments solutions.

Exchanges ponder U.S. exit

Given Worldpay’s intrinsic connection to the cryptocurrency and web3 space, Manji is well-placed to comment on the potential impact of the SEC’s lawsuits and a lack of regulatory clarity in the U.S.

Private talks with major cryptocurrency exchanges operating in America paint a bleak picture, with regulatory scrutiny casting a gray cloud of uncertainty over the future of U.S.-based operations.

“These are big exchanges saying that as we think about our roadmap in the next 12 to 24 months, we’re gonna stop investing in new products and features for U.S. users because we don’t know if we’re gonna be able to have a US business,” Manji said.

The U.S. potentially stands to lose the most, as Manji reflected on the country’s past producing a ‘disproportionate’ amount of innovative products and services across big tech, biotech, aviation driven by a ‘hospitable environment and clear rules’.

“People are gonna be pivoting talent, money, product releases and IP development into other regions. I think Europe is going to be a huge beneficiary as well as the UK, Hong Kong, the UAE and other places.”

Clear regulations are positive for crypto

Manji also reflected on the role of clear regulatory guidelines in driving innovation and adoption of new technology. The European Union signed its Markets in Crypto-Assets legislation into law in May 2023,  setting down regulatory requirements for cryptocurrency businesses and service providers to operate across its 27 member states. 

Speaking to business partners in Amsterdam during Money 20/20, Manji said that regulatory certainty is ‘a positive for the industry as a whole’ that could pave the way for greater institutional adoption from traditional finance players.

“I think it’ll provide a lot of clarity around the rules of the road and what you can and can’t do. It will actually give a lot of comfort to payment processors, banks and all the other infrastructure providers.”