Financial News Digest June 9: Lawsuits Against US Crypto Brokers and US Debt Crisis Resolved

Financial News Digest June 9: Lawsuits Against US Crypto Brokers and US Debt Crisis Resolved

This week’s Financial News Digest is all about two big legal battles against two crypto-giant exchanges and the US debt ceiling bill. Curious about what’s going on? Keep reading to stay up-to-date!

The US has filed lawsuits against Binance and Coinbase

The US Securities and Exchange Commission (SEC) filed lawsuits against Binance and Coinbase, alleging that they violated US securities law by failing to register with the agency. This caused a stir in the crypto space, prompting Binance’s investors to withdraw 790 million dollars from the platform and its US affiliate within 24 hours, plus dropping Coinbase’s shares over 12% after the SEC’s move.

The SEC accused Binance of being an illegal exchange

The world’s largest cryptocurrency exchange, Binance, has been accused by the SEC of operating illegally. 13 legal complaints have been filed against the company in total, which include:

  • being an unregistered exchange, broker-dealer, and clearing agency;
  • providing unregistered offers and sales of cryptocurrency assets;
  • failing to restrict US investors from accessing;
  • misleading investors about Binance’s ability to detect market manipulation;
  • misusing customer funds and sending capital to another trading firm, Merit Peak and Sigma Chain, which are controlled by Binance CEO Zhao Changpeng,

CZ has made it clear that he will defend the company

In response to the SEC’s lawsuit, Binance’s CEO, Zhao Changpeng (also known as CZ), made a statement that Binance would vigorously defend its platform: “All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure.”

The SEC also sued Coinbase, an “exchange” that obtained approval before

Apart from Binance’s lawsuit, on Tuesday, the SEC sued Coinbase over an alleged securities violation for acting as an unregistered broker exchange, clearing agency, and seller of securities, coming on the heels of a similar lawsuit against Binance just 24 hours later.

Response from Coinbase CEO Brian Armstrong

As acclaimed by the SEC, Coinbase has been illegally facilitating the buying and selling of crypto assets and securities, which is deemed a traditional service that requires proper registration by law.

In a tweet on Tuesday, Coinbase CEO Brian Armstrong expressed that he is proud to represent the industry in court to gain clarity around crypto rules. However, he also expressed disagreement with the SEC, pointing out that the regulatory agency had approved Coinbase’s business when it allowed the company to go public in 2021.

“There is no path to ‘come in and register,’ Armstrong said in a tweet. ” He also suggested that a more effective approach for the SEC would be to establish a clearer set of rules instead of regulating through enforcement. But if necessary, clarity can be sought through the courts.

What’s next for the crypto industry?

The highlight of the lawsuit will be the discussion on whether crypto assets should be classified as traditional securities or commodities.

Crypto companies have taken the position that cryptocurrencies should be considered a new type of digital asset with bespoke rules and regulations. However, the SEC disagrees and asserts that many crypto products are securities that should be subject to the same regulations as stocks and bonds. The legal battles involving two crypto giants may prompt Congress to take action on regulation, clearing the way for positive crypto development.

The US debt ceiling bill has passed

Another highlight of the week is the US debt ceiling. After weeks of discussion, the standoff between the Democrats and the Republicans over whether to raise the debt limit was finally resolved last Wednesday.

With an overwhelming bipartisan majority of 314 out of 435 members supporting the bill, President Joe Biden signed the legislation into law on June 3, preventing a potentially catastrophic default on the federal government’s debt.

What’s the deal with the bill?

The bill suspends the 31.4 trillion-dollar debt limit for at least a year and a half until 2025—after the next presidential election. That means the US government can borrow to pay debts already incurred. But the deal doesn’t come with no conditions—the Democrat’s government has to make the following compromise:

  • Fast-tracks certain contentious fossil fuel projects;
  • Trims spending initiatives proposed by Democrats;
  • Imposes restrictions on federal anti-poverty programs;
  • Increases funds for defense and veterans.

The Congressional Budget Office announced that the proposed legislation would save 1.5 trillion dollars in the next decade, primarily coming from cuts in domestic programs such as housing, education, and other forms of discretionary spending.

Social Security and Medicare are off-limits

During the debt limit negotiations, both President Joe Biden and House Speaker Kevin McCarthy promised not to touch the primary driver of US debt: the costs of Social Security pensions and Medicare health benefits.

According to the Congressional Budget Office, as the population of Americans 65 or older continues to grow and reach 46% of the U.S. population, Social Security costs are projected to increase by 67% by 2032. In addition, the cost of the Medicare health program for seniors is expected to nearly double during that period.

These two programs account for approximately 37% of the government’s expenditures and are projected to exhaust their funding within the next decade.

Raising taxes is the way out

Raising taxes seems like a way out of the current state of affairs, but that is not likely to happen in the next several years.

Last year, even though Democrats held the reins of Congress, Biden couldn’t get his proposed tax hikes off the ground. Now, with Republicans in the driver’s seat, they’ve slammed the brakes on any talk of tax hikes. And Biden’s tax proposal would impact high-income earners and large corporations financially while providing relief to those who are less fortunate, but the IMF considers it unrealistic.

Instead, the IMF suggests raising taxes and implementing measures to broaden the tax bases, like consumption taxes, carbon taxes, and axing tax breaks for employer-sponsored health care benefits, mortgage interest, and primary residence sales gains. That would provide more feasible solutions.


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