Lawyers for Binance chief up amid ‘cooling’ US crypto regulatory climate
Legal pressure on Binancethe world’s largest crypto exchange, has underlined the potentially “chilling” effect of a US crackdown on crypto, legal experts have told Decrypt.
The company is facing scrutiny from multiple agencies, including a case filed by the Commodity Futures Trading Commission (CFTC) against both Binance and its founder Changpeng ‘CZ’ Zhao last month.
According to a report from New York TimesZhao has hired defense attorneys from the law firm Latham & Watkins to represent him personally amid the growing legal storm.
Court documents filed on Monday show that lawyers at top firms have been brought in to represent both the company and Zhao himself in the case.
Meanwhile, the Department of Justice is investigating Binance’s conduct in an investigation led by its money laundering group, Reuters reported. At the same time, the Securities and Exchange Commission (SEC) looks at the company’s business practices, New York Times reported.
This week, Binance’s US arm canceled its acquisition of bankrupt Voyager Digital’s assets, a deal that had faced opposition from several regulators including the SEC, although it had been approved by a judge. Commentators including Ava Labs founder John Wu put the track back to regulatory uncertainty in the US
“The United States in terms of creating security just falls behind everyone else,” Wu said in an appearance on CNBC. “The US is going to continue to lose companies, development.”
Decrypt has contacted Binance PR representatives for comment.
A “complex landscape”
Binance’s problems come at a tense time for relations between the industry and regulators in the US, highlighted by Coinbase’s legal action against the SEC this week to try to force the agency to respond to calls for clearer rules.
But William Kraus, partner at FisherBroyles LLP, cautioned against seeing Binance’s difficulties as a direct response to the current climate.
“While it may appear that Binance is being targeted due to recent political pressure to regulate digital assets, it is important to remember that most investigations are conducted confidentially for years before the public learns about them,” he said Decrypt. “As noted in the CFTC complaint, investigations often involve alleged past conduct or relate to issues that have since been corrected by the business.”
However, he added that the CFTC case and the reported investigations signal to crypto companies looking to operate in the states that they will need to navigate a “complex and often changing legal and regulatory landscape.”
That was told by Sam Tyfield, an M&A lawyer at the British firm Shoosmiths Decrypt that recent events indicate that there could be a potential “chilling” effect on the market from the strict approach of the US authorities.
“The US approach appears – to someone not actively involved in the issues – to err on the side of treating crypto-assets as securities, in the absence of an alternative classification, which would bring them within a traditional and well-established regulatory realm,” he said . “This will have an immediate and chilling effect on the US market.”
He added that the development is not only important for the US but also for the rest of the world, noting that while regulators in the EU and Asia “may seem more flexible at the moment”, they are “just a broker or trading platform that blows – up which hits their voters hard away” from imposing a regime as harsh as that in the United States
