The Securities and Exchange Commission (SEC) is investigating the origin of BNB, the Binance exchange’s native cryptocurrency.
Binance launched BNB in 2017 to fund Binance. However, the news agency Reuters claims that more than $2.35 billion in illicit funds were laundered through Binance from 2017 to 2021.
Sources are unsure whether the Reuters claim or something else has spurred the SEC to take a new look at the Initial Coin Offering (ICO). An ICO is a way new cryptocurrency ventures raise capital. ICOs are legal.
The SEC’s case will hinge upon whether digital currencies qualify as investment contracts, especially if they are sold as a way to fund a company and offer a potential to profit as the company grows. The SEC has the authority to regulate investment contracts.
Citing anonymous sources, the financial news agency Bloomberg says that Binance is the target of multiple federal investigations. The BNB probe also is part of a larger federal investigative project into ICOs in general, Bloomberg said. In addition to looking at BNB, regulators also are looking at whether Binance US, an affiliate company, is correctly separated from its global parent. Binance US was created in 2019 and is also known as BAM Trading Services. Its headquarters is located in Palo Alto, California.
Chinese-Canadian business executive Changpeng Zhao, who previously created high-frequency trading software, founded Binance. He originally headquartered the global company in China, but later moved it to the Cayman Islands when the Chinese government began heavily regulating cryptocurrency businesses.
Binance is also the subject of a $5 million class-action lawsuit. Users filed the lawsuit in March, claiming that Binance sold them 79 crypto-assets that should have gone through the process as licensed securities. The assets included Cardano, Solana, and Dogecoin, the lawsuit says.
BNB was originally created as an ERC-20 token on the Ethereum blockchain before it shifted to the Binance chain. The initial coin offering of “100 million tokens at 15 cents per token raised $15 million,” Decrypt says. Users now can trade BNB directly for purchases and payments. Users also gain a discount on Binance transaction fees.
Binance is the largest cryptocurrency exchange by volume. The current trading volume is roughly $1.4 billion in a 24-hour period and it handled $31.4 billion in trading in 2021.
BNB is also the fifth-largest cryptocurrency by market cap. Its total market cap is $48 billion, compared with $600 billion for Bitcoin, the largest cryptocurrency by market cap.
Binance has declined to comment directly on reports of the allegations and investigations. It only says that Binance US is a trading platform founded specifically to serve US customers and comply with US regulations. It also says that it is working to provide education and information to regulators. Binance officials say the company will continue to comply with any and all rules.
Source: https://decrypt.co/102150/sec-binance-bnb-ico-report
