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US lawmakers want to fire Gary Gensler? 🔥
Congressmen draft bill to reform SEC. What will SEC’s showdown do to the crypto market? Binance US shrinks 78% after SEC lawsuit, they hire a high-powered legal team to counter. Reddit goes dark.
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We've got some latest US legislative drama.
The 'SEC Stabilisation Act' 🇺🇸 🏛️
What? This means the US lawmakers want to show SEC Chair Gary Gensler the exit door.
The Main Scoop 🗞️
Rep. Warren Davidson and Rep. Tom Emmer are firing up the House with a brand new bill called the 'SEC Stabilisation Act'. And, one of the key proposals is to give SEC Chair Gary Gensler his walking papers.
Why, you ask? Davidson and Emmer (both notorious crypto supporters and fans of Satoshi's sweet symphony) claim Gensler's run of the crypto realm has been akin to a crypto-crushing Godzilla, leading to a stampede of crypto businesses beyond US borders.
The Nitty Gritty 📜
The legislators accuse Gensler of playing a twisted game of Hotel California with the crypto market – providing no clarity, no resolution, and a confusing labyrinth for crypto enthusiasts.
"American investors and industry deserve clear and consistent oversight, not political gamesmanship," Emmer argued, calling for a shift from tyranny to tranquillity.
But, what are the specifics of this fireball legislation?
It aims to extinguish - Gensler's reign as SEC Chair.
It proposes redistributing power between the SEC chair and commissioners – a kind of power-detox, if you will. 💪
It calls for adding a sixth commissioner to the SEC.
It seeks to establish an Executive Director position to handle day-to-day operations – someone who knows the drill.
It looks to enforce a policy that no political party can commandeer more than three seats on the commission, establishing a political balance of power.
Crypto Mom to the Rescue? 🦸♀️
But let's not forget our beloved 'Crypto Mom', SEC Commissioner Hester Peirce. This legislation could be her moment to shine brighter, as it promises more influence to commissioners like her. The power of rulemaking, enforcement, and investigation authority would be placed under the six commissioners. Plus, they'll have to clock in staggered six-year terms.
Davidson and Emmer might not have explicitly mentioned crypto in their statements, but their pro-crypto reputations speak louder than words. Emmer has previously dubbed Gensler a "bad faith regulator," while Davidson plays a key role in the House Financial Services Committee's Subcommittee on Digital Assets, Financial Technology and Inclusion.
Why is Gensler in trouble? A little reminder:
Gensler's Crypto Crusade: Gensler, the noble knight of the SEC, stood firm on his belief that most cryptocurrencies were not wild and free digital assets, but securities in disguise. He demanded that the crypto exchanges bow to the SEC and register, while warning about the dangers of the mysterious stablecoins.
Crypto Clash with Binance and Coinbase: In June 2023, Gensler and the SEC decided to throw down the gauntlet and challenge two giants of the crypto realm, Binance and Coinbase, accusing them of stepping over the line with US securities laws.
The Ether Enigma: Back in September 2022, Gensler, ever the riddler, dropped a hint that Ether might be joining the ranks of securities after its transformation to a proof-of-stake being. But like any good mystery, he left us hanging, not explicitly commenting on Ether's fate1.
The Great Crypto Debate: To be a security or to be a commodity, that was the question echoing in the halls of the regulatory kingdom. Gensler, ever the philosopher, proclaimed that most cryptocurrencies were securities. But Bitcoin, the original crypto hero, he declared to be a commodity.
Moody's, the famous ratings agency threw some shade at Coinbase's outlook. They went all "negative" on them, downgrading their status from "stable," two days after the SEC drama.
Mark Palmer, the analyst from Berenberg, took a swing at Coinbase's price target, knocking it down from $55 to a modest $39.
Robinhood saw crypto trading volume drop 43% in May compared to April. May's trading volume was 68% lower than in the same month last year. It was down to $2.1 billion from $6.6 billion.
According to a report by CoinShares, In the past two months alone, $417 million has been yanked out of digital asset funds.
CoinShares report in brief:
Total amount pulled out of digital asset funds in two months: $417 million
Amount pulled out of digital asset funds last week: $88 million
Percentage of outflows from North America: 87%
Outflows from Bitcoin in the past week: $52 million
Outflows from Ethereum in the past week: $36 million
Inflows in Litecoin, Solana, and Ripple funds: Less than $1 million each
Binance US is certainly feeling the heat from the SEC lawsuit, with investors running for the hills and liquidity taking a major hit.
The data from crypto data firm Kaiko tells us that market depth on Binance US has plummeted by a whopping 78% since the lawsuit hit.
In the SEC lawsuit, both Binance and its US-based sister company were named, with allegations that Binance CEO Changpeng Zhao engaged in some serious commingling of customer funds through a "web of deceit."
Not exactly a good look!
According to Kaiko analyst Dessislava Aubert, market makers have been fleeing Binance US in droves, leading to the significant liquidity drop of nearly 80%. However, she did mention that the decline on Coinbase and Binance has been comparatively more moderate.
Binance has enlisted a high-powered legal team to defend itself, including hiring George Canellos, a former co-director of the SEC's Division of Enforcement.
George Canellos, who currently serves as the global head of the litigation and arbitration group at Milbank in New York City, brings extensive experience from his time at the SEC. He oversaw major cases, including the high-profile insider trading case involving Raj Rajaratnam.
But Canellos isn't alone in this epic showdown. Other legal heavyweights, including Adam Fee, a former federal prosecutor, and Andrew M. Leblanc, a bankruptcy expert join him. Together, they form a legal dream team that could make Perry Mason jealous.
A significant chunk of the crypto community has decided to go dark in what they're calling a "Reddit blackout."
But don't worry, you haven't been shadowbanned. Phew!
Why the blackout? Well, it all stems from upcoming changes at Reddit that are causing quite a stir. Apparently, planned adjustments to Reddit's API pricing have app developers up in arms. In a show of solidarity, crypto-centric subreddits like r/cryptocurrency, r/bitcoin, and r/ethereum have teamed up with around 7,000 other communities to protest these changes. They're either going private or switching to read-only mode, sending a clear message to the social media giant.
Even some crypto-sceptical subreddits, such as r/buttcoin, have joined the silence. But the crypto-loving subreddits like r/altcoin, r/NFT, and r/dogecoin are still up and running.
TTD Surfer 🏄
Together with UBS, BOCI becomes the first Chinese financial institution to issue a tokenised security in Hong Kong. It was tokenised on Ethereum.
Financial trading platform eToro has announced that US customers can no longer purchase Algorand (ALGO), Decentraland (MANA), Dash (DASH), and Polygon (MATIC), starting July.
BitGo's suit against Galaxy Digital over canceled $1.2 billion purchase has been dismissed by Delaware judge.
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