Chamber of Digital Commerce

Binance joins lobbying group as criticism of the exchange ramps up

The exchange has come under increasing pressure from critics after the collapse of its rival, FTX.

Binance has joined the Chamber of Digital Commerce, a United States crypto industry lobbying group, according to a Dec. 20 press release from the exchange. The move comes after Binance has been criticized for allegedly being unregulated.

Binance’s vice president of public affairs, Joanne Kubba, expressed hope that the partnership would help lead to clear regulations for the crypto industry in the U.S., stating:

“As an organization at the crux of the industry’s rapid growth and complex regulatory environment, working hand in glove with policymakers, regulatory bodies and industry groups like the Chamber is imperative for Binance. Such work is fundamental to our shared mission of fostering the sustainable development of sensible regulations for cryptocurrency and blockchain, which ultimately ensures protections for users.”

According to its website, the Chamber of Digital Commerce advocates for a variety of public policies, including tax parity for digital assets, Anti-Money Laundering/Know Your Customer regulations for crypto exchanges, increased regulatory clarity for security tokens and research on central bank digital currencies.

Through its political action committee, the Chamber made contributions to three congressional candidates in 2022: Republican Representative Patrick McHenry of North Carlina; Republican Senate candidate Blake Masters of Arizona; and Democratic Senator Ron Wyden of Oregon.

Related: New House Financial Services Committee chair wants to delay crypto tax changes

Controversy around Binance

Since the collapse of FTX, calls for crypto regulation have increased, and Binance has come under special scrutiny for being a high-volume exchange that has no clear geographical location or regulatory status.

In a congressional hearing on Dec. 14, Kevin O’Leary claimed that Binance caused the collapse of FTX and is an unregulated monopoly.

Binance’s CEO, Changpeng Zhao, responded to O’Leary’s claims in a Dec. 15 CNBC interview, calling them “a bunch of nonsense claims.”

On Dec. 12, Reuters released a report claiming that U.S. Justice Department officials were deciding whether to charge Binance executives with financial crimes. The executives have not been charged so far, but the report led to large outflows of stablecoin and other cryptos from Binance.

In order to prove that it is trustworthy and solvent, Binance has released an audited proof-of-reserve. However, the proof-of-reserve has been criticized for not disclosing Binance’s corporate structure or internal controls.

Binance.US, a separate exchange with the same namesake as the global trading platform, joined the Chamber of Digital Commerce in 2020. Its rival, FTX, was also a contributor to U.S. politicians. But this appears to be the first time the international Binance organization has directly joined a U.S. lobbying group.

CDC gives nod to Lummis-Gillibrand bill in proposed amicus brief in SEC v. Ripple case

The Chamber of Digital Commerce asked to file an amicus brief in the protracted SEC case against Ripple Labs and supports legislating to clear up a legal gray area.

The Chamber of Digital Commerce (CDC) has requested to file an amicus brief in the case of the United States Securities and Exchange Commission v. Ripple Labs and its executives Bradley Garlinghouse and Chris Larsen. Liliya Tessler of the firm Sidley Austin filed a package of documents, including the proposed brief, with the U.S. District Court of the Southern District of New York on Wednesday.

The CDC is the world’s largest blockchain and digital asset trade group, with over 200 members that include industry players, investors and law firms. It argued that the Chamber does not have “a view on whether the offer and sale of XRP is a securities transaction,” but it is interested in “ensuring that the legal framework applied to digital assets underlying an investment contract is clear and consistent,” adding:

“Maintaining this distinction is critical to developing a predictable legal environment through a technology-neutral precedent, which this Court has the power to do.”

The documents later restate the question as “whether the well-settled law applicable to the offer and sale of an investment contract that is a securities transaction is properly distinguished from the law applicable to secondary transactions in digital assets that were previously the subject of an investment contract” in light of the fact that “no federal law (or regulation) specifically governs the legal characterization of digital assets recorded on a blockchain.”

In the proposed amicus brief, the CDC acknowledges the “fact-intensive” Howey test, which:

“is at times difficult for even experienced lawyers to apply, let alone market participants without legal training.”

The CDC asked the court to reiterate the difference between contracts that are securities and the subjects of those contracts, which are not securities. The cases cited include a hodgepodge of subject items, as is already customary in these discussions. Here, cases involving whiskey casks, payphones, condominiums and beavers were mentioned.

Related: SEC objects to XRP holders aiding Ripple defense

The CDC continued its argument saying that the SEC has “commendably provided guidance on the application of securities laws,” but “the SEC’s enforcement approach, similarly based on Howey, paints a different picture” and the agency has failed to provide guidance to market participants who have requested it.

The CDC continues that the SEC is using in its case against Ripple a novel application of contract analysis of secondary transactions with assets subject to an investment contract, but has not provided guidance on how to apply that analysis. Nonetheless, the SEC still expects market participants to determine whether or not an asset is a security.

The CDC noted the lack of precedent on secondary transactions with the subjects of securities contracts but stated:

“The Chamber believes that, as long as the underlying asset does not include financial interests, such as legal rights to debt or equity, digital assets are presumed to be commodities.”

The CDC noted that the proposed Lummis-Gillibrand Responsible Financial Innovation Act (RFIA) took the same stance when it introduced the concept of “ancillary assets” into consideration. Furthermore:

“The Chamber respectfully asks that this Court draw upon the principles set forth in RFIA for guidance if it decides to clarify the characterization of digital assets, which are the subject of an investment contract or defer such a decision to the legislature.”

Chamber of Digital Commerce says ‘the time has come’ for the SEC to approve a Bitcoin ETF

“As the SEC continues to stonewall, the United States continues to fall further behind other countries as capital that would have been invested in the United States,” said the CDC.

The crypto advocacy group Chamber of Digital Commerce called on the Securities and Exchange Commission, or SEC, to approve applications for Bitcoin exchange-traded funds (ETFs) in the interests of United States-based investors.

In a Monday report titled “The Crypto Conundrum,” the Chamber of Digital Commerce said the U.S. has fallen behind other countries whose residents have access to crypto investment vehicles including Bitcoin (BTC) ETFs. The crypto advocacy group added there were “no reported instances of hacking or theft and no indications of market manipulation” related to Bitcoin ETFs released abroad, suggesting the SEC’s reasoning in previously rejecting applications was “misguided and counterproductive.”

“As the SEC continues to stonewall, the United States continues to fall further behind other countries as capital that would have been invested in the United States, which would be managed by U.S. firms employing U.S. persons, is instead deployed in other, more innovation-friendly countries,” said the Chamber of Digital Commerce — naming Canada, Germany, Sweden, Switzerland and Australia.

The crypto advocacy group pushed back against the SEC citing its obligation to protect investors in denying the approval of a Bitcoin ETF, saying its actions encouraged investors “to acquire their exposure [to crypto] in a less regulated and/or foreign environment where they are much more susceptible to unscrupulous actors and the risks of self-custody.”

“The SEC has now positioned itself as a merit regulator on this matter. It has determined that the American public cannot yet handle the responsibility of familiar, cost-effective, liquid, transparent and regulated access to the Bitcoin markets. Unfortunately, the cost of this position has fallen, and will continue to fall, on U.S. investors and the U.S. capital markets.”

“We can’t deny the huge demand for exposure to this new and innovative asset class,” said Chamber of Digital Commerce founder and CEO Perianne Boring in a Monday interview on Fox Business. “You would think that our regulators would be working with the industry to bring regulated products to the market for retail investors, but they’ve been stopped at every attempt over the past decade.”

According to the report, part of the motivation behind the SEC continuing to deny BTC ETF applications may be political. The CDC said SEC Chair Gary Gensler’s efforts to expand the authority of the regulatory body to include many crypto products was effectively a “jurisdictional land grab.” The group claimed his positions also cut off the engagement between regulators and token issuers.

Related: SEC could approve spot Bitcoin ETFs as early as 2023 — Bloomberg analysts

To date, the U.S. financial regulator has turned down spot Bitcoin ETF applications from 16 companies, often stating the proposed rule changes allowing exchanges to list investment vehicles were not “designed to prevent fraudulent and manipulative acts and practice.” The CDC report claimed that advocacy groups had made “little, if any, progress” in convincing the SEC to change its position on the matter, saying “the United States is no closer to having a Bitcoin ETF than when Cameron and Tyler Winklevoss filed the first registration statement for a Bitcoin ETF in 2013.” However, the SEC has given the green light to several ETFs linked to BTC futures.