Home / Is It Legal to Buy Crypto in the US? SEC Crackdown on Coinbase, Binance Limits Options for Americans
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Is It Legal to Buy Crypto in the US? SEC Crackdown on Coinbase, Binance Limits Options for Americans

Last Updated June 26, 2023 9:56 AM
Teuta Franjkovic
Last Updated June 26, 2023 9:56 AM
Key Takeaways
  • The SEC sued Coinbase and Binance, accusing them of, among other things, selling unregistered securities
  • The most recent legal disputes will proceed to trial, which might take years
  • If all exchanges decide to leave the U.S. – what crypto options are left for citizens?

Under the leadership of Gary Gensler, the Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase just one day after doing the same against the largest cryptocurrency exchange, Binance, on June 5. The cryptocurrency exchange is charged with dealing in cryptocurrencies that the SEC contends should be registered as securities. Among other things, the SEC charged Binance of mishandling customers’ money and luring US clients who aren’t permitted to trade on the exchange.

Many cryptocurrencies are rather existentially challenged by both of these scenarios.

Cryptos are Legal In U.S. But…

The US is making headway in creating federal cryptocurrency legislation, despite the fact that it is challenging to find a consistent legal approach at the state level. In spite of the fact that the Financial Crimes Enforcement Network  (FinCEN) does not view cryptocurrencies as legal tender, it does view cryptocurrency exchanges as money transmitters since cryptocurrency tokens are “other value that substitutes for currency.”

The Internal Revenue Service (IRS) has published tax guidance  defining Bitcoin as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value” despite the fact that it is not regarded as legal cash by the IRS.

Crypto exchanges are permitted in the US and are governed by the Bank Secrecy Act (BSA) . In actuality, this means that companies that offer Bitcoin exchange services must register with FinCEN, put in place an AML/CFT program, keep the necessary records, and file reports with the proper authorities. As for digital wallets and exchanges, the SEC has stated that it regards cryptocurrencies as securities and strictly enforces securities regulations. In contrast, the Commodities Futures Trading Commission (CFTC) has taken a more lenient “do no harm” stance, referring to Bitcoin as a commodity and allowing Bitcoin futures to trade publicly.

Binance.US Preparing to Halt deposits and Withdrawals of USD

Binance.US announced it would halt US dollar deposits as its banking partners get ready to halt the channels for withdrawing US dollars from the exchange, days after SEC sued Binance and its CEO, Changpeng Zhao.

The largest cryptocurrency exchange in the world’s U.S. division said last week that it was making “proactive steps” toward becoming a cryptocurrency-only exchange for the time being.

Customers would not be able to deposit or withdraw US dollars from the exchange, since “our payment and banking partners have signaled their intent to pause USD fiat channels as early as June 13, 2023,” despite the fact that trading, staking, deposits, and withdrawals in cryptocurrencies would all be completely functional.

Binance.US is a subsidiary of Binance.com, a crypto exchange that quickly expanded into a business with billion-dollar profits, primarily from transaction fees from users buying and selling cryptocurrencies. For many users, Binance and other exchanges served as a crucial point of entry into cryptocurrencies by enabling them to purchase assets like bitcoin using “fiat” currencies like the US dollar.

Coinbase’s CEO Says Exchange Could Move Away From U.S.

After the SEC sued Coinbase and Binance, the former exchange’s CEO Brian Armstrong spoke at Fintech Week in London. After being asked whether he could see Coinbase leaving the U.S., Armstrong said : “Anything is on the table, including relocating or whatever is necessary.”

Armstrong contrasted the regulatory structures in the UK, where the Financial Conduct Authority (FCA) oversees both commodities and securities, with those in the US, where the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) are independent organizations.

He asserted the regrettable situation where the CFTC and the SEC are fighting over territory is not present. “The chiefs of the CFTC and the SEC actually release contradicting remarks on a regular basis. How will a company function in that setting? All we need is a set of clear rules,” he said.

Currently, Coinbase’s second-largest market is the United Kingdom. If conditions and the regulatory climate in the U.S. don’t improve over the coming years, Armstrong sees this as a chance to think about moving.

Both Coinbase and Binance are facing very distinct legal challenges – The SEC accuses Binance of mismanaging consumer funds and diverting billions of dollars to a trading company owned by Changpeng Zhao, the company’s top executive.

That charge looks similar to the FTX exchange collapse, which cost clients billions of dollars. Sam Bankman-Fried, the chief executive of FTX, is accused by the prosecution of misusing customer funds by shifting them to a trading company he owned and using them for real estate and political donations.

The Coinbase lawsuit filed by the SEC is significantly more limited. According to the agency, Coinbase has been providing cryptocurrencies that fall within the legal definition of a security, similar to a stock or bond traded on Wall Street, and as such, should be subject to the same regulations as securities.

Over 130 Crypto Lawsuits By SEC

The Securities and Exchange Commission has started more than 130 crypto enforcement cases as of right now. One is for Coinbase’s competing business, Bittrex.

In May, Bittrex  filed for Chapter 11 bankruptcy protection, just a month after saying it would shutter its U.S. operations

Another exchange, Kraken , felt the same way about the confusing rules. The company legally stopped offering services to American consumers in February of last year as a result of a settlement with the SEC.

Binance/Coinbase suits also had an instant effect on the trading software Robinhood. The company stated that it would no longer support transactions with the three well-known cryptocurrencies Solana, Cardano, and Polygon, as of June 27 since the SEC classified them as unregistered securities in court documents.

The venture capital company Andreessen Horowitz has its sights set on the United Kingdom (UK) as the likely future hub for the cryptocurrency business in the aftermath of recent SEC litigation, which some have interpreted as a government effort to destroy the cryptocurrency environment. In a significant step, the company has announced the opening of its first international office in London, which will also serve as the location for its next crypto accelerator program.

In a recent development, major Singapore-based cryptocurrency exchange Crypto.com has announced its withdrawal from the U.S. market, citing the country’s present crypto market uncertainty as the cause. However, the business will continue supporting the enormous arena in Los Angeles, California, formerly the Staples Center.


All of these actions increase the need for U.S. lawmakers to develop a thorough regulatory framework by this year.

Cryptocurrency activity will probably keep migrating to decentralized entities and locations outside the United States until this happens. The amount of cryptocurrency venture capital funding will probably stay low.