Binance Gets Into Battle with SEC
Level 2 - Value Investor
Welcome Avatar! For those that are paid subs you already know our comments from back in April and as new information presents itself we adapt. You can see some of the new items at the end of the post as we’ve decided to make this a mix of free/paid content. A rare occurrence around these parts.
Prequel: Apple!
For fun just because we saw the headlines, the new Apple Vision product is interesting but there is no way anyone should bother buying it. Unless you’re a techie person who is obsessed with it, spending $3,500 and then $1,000 on a charger is not going to be high ROI for most.
The most important thing is that there is *NO* special tools/software.
That part is the reason to avoid being the first guinea pig. If it ends up being a hit product, you can jump on the band wagon during the 2nd or 3rd generation. The iPhone 3G or 3Gs was the rough range to try the product.
Since hardware is more of a convenience tool, it doesn’t really change your productivity that much. It just changes the display. If it came with software that did something specific for business users, then we’d reverse course in seconds. We’ve got tons of software that provide real time data/information (value) and hardware doesn’t do that. It just presents it in a different way.
Current Guess: Based on the marketing behind it, they are using it to address work from home wealthier people. In that situation (since you’re making a ton and working from home) sure you can try it out. It would reduce the need for desk space and potentially make you more “in tune” with your surroundings.
All the videos seem to highlight rich families in their homes using it as a way to watch videos, work harder and mix work/family life. That tells you the clientele already. Definitely do not wear a $3,500 device on the subway at 11pm.
Sales: Numbers will be good at launch since rich people don’t care much about price. Rich people spend $300 on dinner without blinking and always try out the latest tech. Wait until about January of 2025 to see the true results. If you see upper middle class types and younger workers talking about it still (then go ahead and take a look at the second version they release). Remember. Google glass was a total flop so there are no guarantees here.
Let the marketing hype drive initial sales, you’re not going to lose anything by waiting for reviews. It’s like any prototype, let others deal with the bugs and issues. Don’t be first on hardware testing!
Part 1: Binance SEC Lawsuit
The USA is going after Binance for operating an unlicensed securities exchange. Voyager, BlockFi, Luna, Celsius, FTX and many other scams got through the pipes but this one they are going after. Yes this is meant to be a joke since all the CeDeFi products were scams from day one with no exception.
Pointing Out the Obvious: If you’ve raised money through some crypto project and are a US citizen it’s going to be ugly if they decide to take a look at your project.
If you have your name tied to any crypto product, yes, this means you!
The funniest one so far was the NFT project made by a Lana Rhoades where the money was simply taken. The other hilarious ones are the influencer coins since those are directly tied to single individuals.
Before defending any of these we already know what happens when large amounts of money move and you’re easy to find.
Narrator: Yes he was Arrested.
Onboarding Gets Harder: With more and more exchanges getting crushed/regulated into infinity, this means on-boarding and off-boarding gets harder and harder. If you own exchange stocks? Honestly have no idea why you’d gamble like that.
Even if you guess correctly on the exchange that survives regulation, take a look at the costs of compliance with every single transaction record on-chain going forward.
Binance has been the best exchange for quite some time. Now that it is no longer an option (psychologically speaking most won’t want to touch it), trading volumes likely go down for crypto.
Short-Term? The same old back and forth… over and over again. This won’t be resolved any time soon. We did get some hints in terms of what they view as securities: BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, AND COTI.
The two major coins (ETH And BTC are not mentioned). Oddly, Ripple isn’t mentioned either.
The USA has to slowly tip-toe its way into defining which coins are securities. There are tokens such as ALGO in here which were specifically mentioned by Gensler himself (during teaching sessions!). Will be interesting to monitor.
In the near-term, this is only going to put more regulatory pressure on exchanges and create a long and painful process in determining what is and isn’t a security within the 1,000s of tokens out there today.
Long-term? Unless there is a major issue with Binance at resolution, most of the time this just results in fines. It doesn’t take long to look at the billions of dollars in fines banks have paid for doing all kinds of illegal activity from faking accounts to manipulating market rates.
As long as Binance gets handed some sort of fine, they will likely remain as the strongest exchange in the future. Crypto is moving overseas pretty rapidly and the USA is not doing itself any favors in terms of keeping the talent in the country.
Despite the initial knee jerk reaction to dump BNB (which is justified) if they can maintain market leadership outside of the USA they will be a behemoth for years to come. Seems every 2-3 weeks a new firm leaves for Asia/Dubai/offshore if they are involved in crypto.
Reminder: This is the 20th reminder about crypto. We’re reminding people once again to separate all crypto banks with your regular banks. If you have a mortgage with Citi and you are buying coins on Coinbase/Gemini/Binance (any exchange) that needs to be done with a bank account outside of Citi. Yes. This means you need two bank accounts.
This should not be an issue for you because if you’re taking this stuff seriously, you’re doing things the right way and doing them once. You don’t want to have your mortgage with say Citi and they shut down your account. The number of headaches there will be beyond annoying.
Short Conclusion
Short term, this is just going to cause more regulatory pressure and cause banks to stop allowing a lot of crypto transactions to and from exchanges on a regular basis. Just like our warning on CeFi scams like Blockfi, this is the 20th warning on bank accounts. You’re already seeing Chase (a mega firm) become hard to work with. Keep things separate
Expect trading volume to die out for a bit. Even if people are using Binance US right now, the number of transactions will decline due to the headlines
For now, without anything else but the release, we doubt this results in more than a fine. They likely pay something and then decide if they even want to operate in the USA ever again. This is less impactful than most may think. The USA is becoming stricter which means the growth is going to be outside the USA