The US Securities and Exchange Commission’s (SEC) recent legal action against Binance, the world’s largest crypto exchange, has led to a significant drop in the crypto market. The market has decreased by over $50 billion since the announcement of the lawsuit on 5 June. Despite this, Binance outflows have remained minimal, with only around 10,000 BTC withdrawn.

The SEC lawsuit accuses Binance, its founder and CEO Changpeng Zhao, and Binance.US of violating federal securities laws. The lawsuit alleges that Binance offered unregistered securities to the public through the BNB token and Binance-linked BUSD stablecoin, violated securities law through Binance’s staking service, allowed for commingling of customer funds, allowed US persons to trade on the platform despite denying it, and failed to register as a clearing agency, broker, and exchange.

The SEC has deemed 61 cryptocurrencies to be securities, including recent additions such as Binance Coin, Binance USD, Solana, Cardano, and Polygon. This level of regulation now covers over 10% of the $1.09tn total crypto market capitalisation.

Despite the significant losses, the market appears to have stabilised, with total capitalisation down 4.5% on the day to $1.13 trillion. The SEC is seeking to stop Binance and its agents from continuing to violate federal laws, disgorge any “ill-gotten gains,” and pay civil penalties.

This recent legal action serves as a reminder of the increasing regulatory scrutiny and uncertainty in the crypto market. Investors must remain cautious and be aware of the potential risks involved when investing in digital assets.