Bitcoin falls after CFTC sues crypto exchange Binance for allegedly violating trading rules

A worsening macroeconomic climate and the collapse of industry giants such as FTX and Terra have weighed on bitcoin’s price this year.

STR | Nurphoto via Getty Images

Cryptocurrencies fell on Monday morning after the CFTC sued Binance, the largest crypto exchange in the world, for allegedly violating trading rules.

The price of bitcoin fell 3.5% to $26,883.11, according to Coin Metrics. Ether fell 3.3% to $1,708.78.

In a lawsuit, the CFTC, or Commodity Futures and Trading Commission, said Binance violated eight provisions of a commodity trading law “designed to prevent and detect money laundering and the financing of terrorism.” The lawsuit, filed Monday in federal court in Chicago, has the potential to disrupt the exchange’s operations.

The BTC rally has slowed down over the past week, but today’s move is largely Binance driven

“Many knew that Binance had a bullseye on its back, but this still annoys some crypto traders,” said Ed Moya, analyst at Oanda. “Binance’s success is necessary to ensure that a good portion of the cryptoverse can grow.”

Dessislava Aubert, an analyst at crypto data provider Kaiko, said that while bitcoin’s March rally has slowed over the past week, Monday’s decline was largely driven by the Binance news.

“Binance is the largest crypto exchange and any US regulatory action against it will have huge implications for the industry,” she added.

The filing follows a CNBC report about Binance employees working to undermine the exchange’s compliance controls in China, using some of the same techniques the CFTC claims Binance used to attract US users.

The news is the latest chapter in this year’s regulatory crackdown on crypto companies, which has been a significant price catalyst for bitcoin and helped it diverge from its previously high correlation with stocks. Monday’s initial drop was the biggest move for bitcoin since March 22, when the Securities and Exchange Commission issued Coinbase a Wells notice warning the exchange that it had identified potential violations of US securities law.

The correlation between bitcoin and stocks has remained at the lowest levels since September 2021.

Bitcoin is still on track to cap a winning month. It has risen 16% in March, while ether has increased by 6%. Before Monday, analysts said that the rally in March may pan out, but that a long-term bullish formation has been established.

Crypto-exposed stocks also suffered from the news. Coinbase and Microstrategy each fell 10%. Miners Marathon Digital, Hut 8 and Riot Platforms lost about 8% each.

The losses came in tandem with an increase in bond yields, which pushed the technology-heavy Nasdaq Composite down 0.6 percent. Rising interest rates make future profits, as promised by growth companies, less attractive.

— CNBC’s Rohan Goswami contributed reporting