BNB is finally making some recovery after recording a 27% drop over a week. Up over 5% in the past 24 hours, BNB is trading at $246.57, as of writing, while managing $1.16 billion in trading volume.
BNB, the fourth largest cryptocurrency with a market capitalization of $38.47 billion, has recovered 10% from its low on Monday. Despite the recent uptick, gains for 2023 have dwindled to a mere 1.80%. From its all-time high of $686 in May 2021, the value has depreciated nearly 64%.
Contrasting with recent fluctuations, BNB has displayed remarkable growth since its inception. As the native token of Binance, the world’s largest centralized crypto exchange (CEX), and its blockchain, BNB Chain, it has risen an astonishing 623,569% from its October 2017 low of just under $0.040.
The latest gains come a week after Binance CEO Changpeng “CZ” Zhao took to Twitter early on Wednesday to dismiss any rumors that the exchange has been selling BTC to keep BNB’s prices from falling below certain levels.
“Binance have not sold BTC or BNB. We even still have a bag of FTT,” Zhao tweeted, using his infamous “4” moniker.
The clarification from CZ has been regarding tweets from popular traders @JW100x and @52kskew, which pointed to short-term price correlations between a sell-off in BTC and a BNB purchase. The tweets went viral and have been viewed over 3 million times cumulatively.
Meanwhile, open interest (OI) on BNB tokens continues to surge, as per Coinglass. Total OI rose to 1.59 million BNB ($393.70 million) on Wednesday, up from 1.57 million BNB on Monday, the highest since the beginning of the year. The OI has increased by 8.67% in the past 24 hours.
An increase in OI in tandem with the price decrease suggests an influx of short positions. This could have been due to the on-chain liquidation at around $220 on Venus Protocol, which is an algorithm-based money market system on the BNB Chain.
In an attempt to assuage market nerves, Venus tweeted this week that the core team of the BNB Chain will take over the BNB position on protocol if the crypto asset hits the liquidation threshold. The tweet has since been deleted and replaced with a new tweet for more context and transparency.
Early last week, Binance also made a significant change to its Terms of Service, under which if a user still has a delisted digital asset in their Binance account after a certain period, the platform reserves the right to convert them into different crypto, and it may also change the order size available for them.
A representative from Binance clarified that changes to their terms were underway before the SEC lodged its complaint, and these modifications were not triggered by recent market volatility.
The primary focus of these changes pertains to the management of “zombie assets.” These are assets that have been previously delisted by Binance yet may linger in users’ Binance wallets for extended durations. Without timely conversion, these assets could become stranded in wallets if their respective networks cease to be supported.
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The Latest in Binance Vs. SEC
Most notably, the latest price action comes as Binance has avoided a US asset freeze for now despite the US Securities and Exchange Commission’s (SEC) push towards the same.
The Binance vs. SEC battle started last week when the regulator launched a 13-count lawsuit against the exchange and its founder and CEO, CZ, accusing them of violating securities laws. The SEC charged them with failing to register as an exchange and engaging in unregistered crypto transactions.
The SEC also alleges that BNB is a “security” which was unlawfully sold in the US as part of its initial coin offering (ICO) in 2017.
According to the agency, the ICO was marketed and sold to investors globally, and Binance imposed no restrictions on US investments in the token. As such, the company violated securities laws by selling BNB tokens to over 40,000 US investors, said the Commission.
Additionally, the SEC has charged Binance and CZ with misusing customer funds, knowingly misleading investors, and dodging basic disclosure rules. As per the allegations, the company moved millions to entities like Merit Peak and Sigma Chain, which CZ owns.
Binance has denied any wrongdoing and accused the SEC of waging an “ideological campaign” against the crypto industry by targeting it and other major firms like Coinbase.
In the latest shake-up since the lawsuit, Binance has halted trades across several BNB and ETH token pairs. On Monday, the company announced that it ended trading for more than a dozen pairs that involve its defunct BUSD stablecoin, its native BNB token, and ETH.
Users on the international Binance exchange can continue to trade these currencies as part of other pairs on the platform. However, they have been advised to deactivate their Trading Bots, which are automated tools that execute trades on behalf of users. This precautionary measure is recommended to be taken before the removals are finalized in order to mitigate potential losses.
This comes after Binance US eliminated more than forty crypto trading pairs last Wednesday, with the majority using the stablecoin USDT as its pair as well as BTC and BUSD.
The Case of $2.2 Billion Customer Funds
Last week, Binance US said that its banking service providers would pause USD withdrawals starting as soon as June 13 and that the platform would operate as a “crypto-only exchange” until it found new partners. However, crypto services such as staking products that the SEC flagged in its lawsuit would remain operational, it said at the time.
On Tuesday, in response to the SEC’s lawsuit with a motion for a temporary restraining order, the federal Judge told the SEC and the American arm of the crypto giant to hash out an agreement that would allow the company to maintain basic operations while defending itself against charges it violated securities laws.
US District Judge Amy Berman Jackson declined a request by the Commission to freeze the assets of Binance’s US operations.
“Shutting it down completely would create significant consequences not only for the company but for the digital asset markets in general,” said Judge Jackson at the June 13 hearing.
At the court hearing, the agency argued that the asset freeze was necessary to protect $2.2 billion in US customer assets held by Binance.US, given the company’s relationship with its international cousin.
The US arm of Binance telling the SEC that it may cease doing business in the US is another reason prompting the need for an emergency order, the regulator’s attorney said.
Countering the SEC’s allegations, Binance.US said that freezing its assets would prevent the company from paying its employees, suppliers, and vendors. Moreover, such a move would cause its operations to “quickly grind to a halt” and would be a “death sentence” for its business before it could prepare a legal defense.
“We’re not willing to accept a death penalty eight days into the case,” a lawyer for Binance.US said at the hearing.
The US affiliate of the global crypto exchange further called this a “draconian and unduly burdensome” move by the regulator.
“The SEC seeks unnecessary and unjustified relief. Far from requesting relief that is ‘carefully calibrated’ to ‘maintain[] the status quo,’” argued Binance.US’s motion.
Judge Jackson has ordered the US entity of Binance to provide the court with a list of its business expenses and ordered the exchange and the SEC to continue negotiating.
Towards the opening of the hearing, Judge Jackson also asked some questions about the heart of the matter — what makes crypto security and the difference between a “crypto asset” and a “crypto asset security,” but she was not satisfied with the answers.
In the agency’s defense, SEC attorney Matthew Scarlato said the regulator has already provided many instances of cryptos in the broader complaint that it believes to be securities. At the same time, the SEC reserved the right to assess the rest of the crypto listed on the exchanges later.
The Judge also expressed skepticism about the agency’s use of its enforcement powers to regulate the crypto industry, calling it “inefficient and cumbersome.”
Binance.US and SEC Must Negotiate
In a June 12 joint memorandum submitted ahead of the hearing on the restraining order, Binance.US and Zhao denied the SEC’s claims that funds were ever mishandled and accused the SEC of being “unable to identify a single instance” where Binance.US misused customer funds.
According to Binance, this wasn’t a case of emergency at all, but rather one completely “manufactured by the SEC for its own purposes” as the regulator sued two crypto giants on back-to-back days, assaulting the crypto industry as a whole.
In response to the SEC’s motion, the exchange has argued that the regulator hadn’t conclusively proven they listed any securities and that the Commission hadn’t shown any proof supporting an emergency motion.
The Monday filing from Binance.US also discussed the company’s cooperation with the SEC before last week’s enforcement action.
“Until very recently and despite being provided with substantial information about BAM’s custody of assets, the SEC did not express to BAM any of the concerns animating its motion,’ the filing said.
“Over the past several weeks, the SEC inexplicably began to focus on the custody of BAM’s assets, and BAM continued to cooperate in good faith, working around the clock to address the SEC’s questions.”
The joint memorandum supporting Binance.US, Binance Holdings, and Zhao argued that the SEC had allowed the exchange and its US entity to operate since their respective launches and “grow to their current size” without bringing any kind of enforcement action up until now.
For now, Binance’s funds are not being frozen, but the final decision on the SEC’s motion for a temporary restraining order won’t come until the two parties have worked through the situation with the magistrate, said the Judge.
An update on the negotiations has been scheduled for Thursday, June 15. The Judge noted the SEC and Binance.US seemed “not that far apart” when it came to reaching an agreement on the matter.
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