Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Which Cryptocurrencies will the SEC destroy?

Many observers think the SEC is trying to destroy cryptocurrencies. For example, SEC lawyers are trying to get Federal courts to declare the two largest cryptocurrency exchanges illegal.


For instance, SEC attorneys are suing the second-largest crypto exchange Coinbase (COIN). The SEC’s suit accuses Coinbase of selling securities in violation of the Securities Exchange Act of 1934.


SEC attorneys are also suing the world’s largest cryptocurrency exchange. Binance (BNB), and its founder, Changpeng Zhao. In particular, SEC lawyers charge Zhao and other Binance experts allowed US residents to trade on Binance’s platform in violation of federal law.


To elaborate, SEC attorneys claim Zhao created two front companies, BAM Trading and BAM Management US Holdings Inc., to circumvent US law. An SEC complaint accuses “Binance and BAM Trading with operating unregistered national securities exchanges, broker-dealers, and clearing agencies.”


If successful, this lawsuit could make it illegal to sell many cryptocurrencies in the US. To elaborate, the Securities and Exchange Commission (SEC) is America’s securities regulator.


Could the SEC Destroy Binance (BNB)?

The SEC’s action could disrupt the cryptocurrencies market because it targets the token with the fourth largest market cap: Binance (BNB).


Binance violated federal by selling “Binance and BAM Trading with the unregistered offer and sale of Binance’s own crypto assets, including a so-called exchange token, BNB, a so-called stablecoin, Binance (BUSD),” an SEC press release claims.

BNB was the fourth-largest cryptocurrency with a Market Cap of $35.825 billion and a 24-Hour Market Volume of $1.004 billion on 12 June 2023, CoinMarketCap estimates. BUSD was the 15th largest cryptocurrency with a Market Volume of $4.641 billion and a 24-Hour Market Volume of $2.297 billion on 12 June 2023.


How the SEC is trying to destroy Cryptocurrencies


Hence, the SEC is targeting the fourth and 14th largest cryptocurrencies. Plus, an older SEC lawsuit targets XRP (XRP) the sixth largest cryptocurrency. XRP, the cryptocurrency formally known as Ripple, had a $27.317 billion Market Capitalization and a $1.197 billion 24-Hour Market Volume on 12 June 2023.


Thus, the SEC is trying to destroy three large cryptocurrencies with the lawsuits. In detail, SEC attorneys charge these assets violate the Howey Test. The Howey Test refers to SEC vs. W.J. Howey Company, a 1946 US Supreme Court ruling. In Howey, the Supremes defined a security as an investment of money in a common enterprise with the exception of a profit.


The Howey Test can give the SEC the power to regulate and ban cryptocurrencies. To explain, two federal laws, the Securities Act of 1933, and the Securities Exchange Act of 1934, require all securities sold in the USA to be registered with the Securities and Exchange Commission (SEC). Hence, unregistered are illegal in the United States.


How the SEC is trying to destroy DeFi


SEC attorneys are using the Howey Test to classify 37 cryptocurrencies as “securities,” BeinCrypto claims. Those tokens include decentralized finance (DeFi) tokens such as DASH (DASH), XRP, the Mirror Protocol (MIR), and Power Ledger (POWR). They also include the Terra USD (UST) stablecoin, and the Decentraland (MANA) digital real estate investment.

I think the SEC is trying to crush decentralized finance because many DeFi products promise a profit. For example, the Mirror Protocol allows users to stake tokens for an annual percentage yield (APY).


Moreover, the SEC claims Binance violated securities law by offering “certain crypto-lending products, and a staking-as-a-service program.” Thus, the SEC is trying to destroy DeFi.


How the SEC could destroy Bitcoin (BTC) and Ethereum (ETH)


Cryptocurrency traditionalists such as Bitcoin (BTC) and Ethereum (ETH) fanatics, will claim their tokens are immune to SEC action. I think these people are mistaken because the SEC is targeting the entire cryptocurrency ecosystem.


To explain, most people buy cryptocurrencies through exchanges such Binance and CoinBase and platforms such as PayPal (PYPL) and the Cash App. Hence, Bitcoin (BTC) and Ethereum (ETH) owners could get stuck with assets for which there is no market.

For example, Binance is the largest cryptocurrency exchange with a $6.822 billion 24-Hour Trading Volume on 12 June 2023. In contrast, CoinBase, the number two exchange, had a $890.309 million 24-Hour Trading Volume on 12 June 2023.


I predict the SEC will go after other exchanges such as Bitget, Kraken, Huobi, if it destroys Coinbase or Binance. Once the exchanges are gone, the SEC will come for PayPal, Robinhood, and Square’s CashApp. Unless those companies go to Capitol Hill and spend big money to get Congress to put a leash on the SEC.


Is the SEC Trying to kill Crypto?


SEC Chair Gary Gensler claims he is trying to tame what he calls the “Wild West” of crypto. Gensler thinks of himself as a heroic marshal trying to clean up the town.


However, cynics will say that Gensler is a gunslinger Wall Street hired to kill some potentially dangerous competitors. By shutting down cryptocurrency, DeFi, and synthetic investments Gensler protects Wall Street’s monopoly on investments.

Interestingly, Coinbase management claims the SEC would not let their company register as a legal securities exchange. “The SEC will not let crypto companies ‘come in and register’ – we tried,” a Coinbase press release claims.


Hence, there is evidence, Gensler does not want Crypto securities. Cynics will say Coinbase’s true crime is trying to offer something besides traditional stocks sold through a licensed brokerage.


Does the SEC Protect Investors?


Notably, the SEC has a long history of ignoring fraudsters who pretend to operate within the traditional rules. For example, financial analyst Harry Markopolos, alleges the SEC ignored his warnings about “advisor” Bernie Madoff’s $64.8 billion Ponzi scheme.

Markopolos was so disgusted with the SEC that he wrote a book condemning the commission. Madoff collected of billions of dollars from investors for stock trading but no stock.


Markopolos claims SEC regulators refused to listen to his warnings. Madoff operated well inside the system. For example, Madoff served as chair of the NASDAQ in 1990, 1991, and 1993. Moreover, Madoff one of the New York Stock Exchange’s biggest traders. Yet nobody noticed he was a fraud for 17 years.


Is the SEC fighting for Wall Street?


Wall Street apologists claim the traditional investment industry protects the average investor with “expertise.” However, there is no evidence investment advisers have any special expertise or ability.



America’s most successful stock investor. Warren Buffet, thinks “monkeys throwing darts at the page” could be more effective than investment advisors. “I hate to use the example, but you can have monkeys throwing darts at the page, and, you know, take away the management fees and everything, I’ll bet on the monkeys,” Buffett told Fox News.


Buffett, the world’s fifth-richest man has made a $117.1 billion fortune through his Berkshire Hathaway (BRK.B) conglomerate. Bloomberg claims Berkshire Hathaway has delivered a 19.8% compounded annual gain since 1965.


Yet Gensler wants to leave ordinary Americans at the mercy of the monkeys. Essentially, Gensler wants to keep ordinary people from investing their own money.


Hence, I predict there will be public anger and a nasty reaction if Gensler retires from the SEC and takes a high-paying job at Goldman Sachs (GS).


Speculators need to pay attention because Gensler is gunning for cryptocurrency. I think Gensler could destroy many cryptocurrencies and do enormous damage to American finance if the courts or Congress do not block his destructive crusade.