Commissioner Hester Peirce stressed that this change does not mean that fraud will be tolerated
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Changpeng Zhao
The Securities and Exchange Commission (SEC) has officially withdrawn its lawsuit against Binance and founder Changpeng Zhao.
The original suit, filed in June 2023, accused Binance of multiple violations, including illegally serving US customers, artificially inflating trading volumes and improperly handling customer funds. The SEC also alleged that Binance facilitated the trading of unregistered securities. The latter is an allegation previously used against other crypto exchanges such as Coinbase and Kraken.
This rejection represents a shift in the regulatory approach to the crypto industry. It follows the Justice Department’s closure of the crypto markets enforcement team and the appointment of a venture capitalist with strong ties in the crypto world as the new chairman of the Commodity Futures Trading Commission.
Binance, the world’s largest digital asset exchange, recently secured a $2 billion investment from Emirati sovereign wealth fund MGX, payable entirely in USD1, a new stablecoin launched by World Liberty Financial – a company linked to the Trump family.
Binance’s relationship with World Liberty Financial is deepening, including with ventures in Pakistan, where WLF co-founder Zack Witkoff, son of US Middle East envoy Steve Witkoff, recently struck a deal with the Pakistani government. Zhao has also been appointed an advisor to the Pakistan Crypto Council, a state-backed entity responsible for shaping national policy on digital assets.
SEC decision and implications
The SEC’s decision to dismiss the case comes after Binance reached a $4.3 billion settlement with the US government last year. Zhao pleaded guilty and resigned as CEO, retaining a significant portion of his assets.
Commissioner Hester Peirce emphasised in an interview with CNBC that the dismissal reflects a shift toward clearer regulation of the crypto industry. She emphasised the need for specific rules to address the unique characteristics of crypto and avoid ambiguity in enforcement actions. Peirce also made clear that this shift does not equate to lenience toward fraudulent activity.
Under new leadership, the SEC is shifting from enforcement-focused tactics to more engagement and regulatory easing. Under the leadership of Peirce and newly appointed Chairman Paul Atkins, the agency hosted a series of roundtable discussions.
In addition, the SEC removed key rules that previously restricted Wall Street’s involvement in the crypto space. In January, Staff Accounting Bulletin 121, a controversial directive that required banks to classify crypto assets as liabilities, was rescinded by the SEC. This move was welcomed by Peirce.
In February, the agency issued new guidance clarifying that most meme tokens are not considered securities under federal law.
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