The agency has declared that Bitcoin and Ether are commodities, potentially setting a precedent for future cryptocurrency regulation.
On Monday, the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against cryptocurrency exchange Binance and its CEO, Changpeng Zhao, for allegedly violating trading and derivatives laws. According to the CFTC, Binance executed commodity derivatives transactions to and for people in the US without requiring customers to provide identity-verifying information and failing to put in place compliance procedures. Binance's native token, BNB, dropped 3.8% on the news.
The CFTC is responsible for regulating derivative products, including financial instruments tied to commodities. Its chair, Rostin Behnam, said in a statement that the agency is looking to continue regulating the "volatile and risky" digital asset market, and that the lawsuit against Binance should be a warning to others in the industry that the CFTC will not tolerate willful avoidance of US law.
This is not the first time Binance has faced regulatory scrutiny in the US. Last year, the company was investigated by the Justice Department for potentially violating the Bank Secrecy Act. While a spokesperson stated that Binance works with agencies regularly to address any outstanding questions, it is unclear whether the company was being investigated for violating the act.
The CFTC's lawsuit against Binance is just one in a series of recent regulatory actions taken against large cryptocurrency players in the US. Last week, the Securities and Exchange Commission (SEC) served Coinbase with a Wells notice for alleged securities violations, prompting the company's CEO, Brian Armstrong, to state that Coinbase would be willing to take the commission to court if necessary to defend itself and other industry firms.
Zhao's response to the news on Twitter with the number "4" suggests he considers the news to be either fake or "FUD" (fear, uncertainty, and doubt). Regardless, this latest lawsuit serves as a reminder that the cryptocurrency industry is still subject to regulations, and companies must comply with relevant laws if they want to operate in the US market.
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