In a significant move reflecting a broader shift in regulatory approach, the U.S. Securities and Exchange Commission (SEC) has voluntarily dismissed its 2023 lawsuit against Binance, the world’s largest cryptocurrency exchange, and its founder, Changpeng Zhao. The lawsuit had alleged that Binance operated unregistered securities exchanges and misled users about trading controls. The dismissal, filed in a Washington, D.C., federal court, comes with prejudice, preventing the SEC from reopening the case.

This decision aligns with the SEC’s evolving stance on cryptocurrency regulation under the current administration, which contrasts with the stricter approach taken previously. The SEC emphasized that the dismissal was a discretionary policy matter and does not indicate its position on other crypto-related litigation. Notably, Binance had previously faced a criminal case, resulting in a $4.32 billion penalty and Zhao serving four months in prison.

The SEC’s move coincides with the establishment of a new “crypto task force,” aimed at developing a dedicated regulatory framework for digital assets. This reflects a broader policy shift under SEC Chairman Paul Atkins, focusing on creating clear guidelines for crypto tokens classified as securities and promoting lawful issuance, custody, and trading of crypto assets while deterring misconduct. 

Implications for Compliance Professionals:

• Regulatory Clarity: The dismissal indicates a move towards clearer regulatory guidelines, reducing uncertainty for crypto firms.
• Compliance Frameworks: Firms should stay abreast of evolving regulations to ensure their compliance frameworks align with the latest SEC guidelines.
• Engagement with Regulators: Active engagement with regulatory bodies can provide insights into upcoming changes and help shape practical compliance strategies.

Finassent recommends that organizations closely monitor SEC announcements and participate in public consultations to stay informed and contribute to the development of a balanced regulatory environment.

Source: US SEC Litigation Releases and  Joint Stipulation to Dismissal and Releases