US investigates Binance over digital currency issuance

BNB Token is currently the 5th largest digital currency in the world. According to Bloomberg, investigators are looking into whether the 2017 initial coin offering (ICO) constituted a sale of securities, which is required to be registered with the SEC.

The SEC is investigating Binance for the issuance of the BNB digital currency. (Image: Getty Images)

This development can be a problem for Binance in the context that this cryptocurrency exchange is facing many investigations in the US.

The SEC has taken many legal actions against ICOs, the issue of digital currency to raise capital. BNB is a bright spot in the crypto empire of Binance, the world’s largest cryptocurrency exchange.

Binance declined to comment on the developments of the case, saying only that the company is cooperating with authorities and is responding to all regulatory requests.

Based on the 1946 US Supreme Court investment contract definition, a digital currency can be regulated by the SEC if an investor buys it to raise capital for a project or company with the intention of making a profit. word.

Binance is not located in any country, but has many branches scattered around the globe. Previously, the company faced investigations from the Department of Justice, the Commodity Futures Trading Commission and the Internal Revenue Service.

Prior to the 2017 launch of BNB, Binance outlined its plans in a white paper, which stated that the total amount of BNB issuance would be limited to 200 million units, half of which would be sold through an ICO. implemented on multiple platforms around the world. Another 80 million units will be dedicated to the founding team of Binance, which includes CEO Changpeng Zhao.

In the white paper, Binance states that approximately 85% of the funds raised in the ICO are used to build and market Binance’s global exchange. To attract investors to BNB, Binance has reduced fees for traders paying with the coin. They also pay many contractors in BNB.

Currently, however, Binance is not doing some of the things listed in the white paper, like spending 20% ​​of the exchange’s quarterly profits to buy back BNB. In a 2020 post, Mr. Zhao said the change was made under legal advice that it could cause BNB to be misunderstood as a security in some regions.

When it first launched, BNB was priced at just $0.15 per coin and peaked in 2021 at nearly $700 per coin. In the wake of the massive increase in the cryptocurrency market during the COVID-19 outbreak, the value of BNB has surged.

Currently BNB is valued at around $300 and has a market capitalization of around $48.5 billion. BNB is also a unified part of Binance’s expanding crypto ecosystem, which includes everything from digital wallets to blockchain technology.

If BNB is identified as a security, Binance will be in a similar position to Ripple Labs, which is currently locked in a legal battle with the SEC, after the agency sued Ripple Labs and two of its directors on December 2020 with allegations of violating regulations when selling XRP digital currency. Ripple argues XRP functions as a medium of exchange for cryptocurrency.

According to SEC Chairman Gary Gensler, virtually all ICOs are securities and need to be regulated by the SEC.

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