Binance.US and the Securities and Exchange Commission (SEC) seek common ground to avoid a complete asset freeze on the cryptocurrency trading platform.
The SEC had sought an asset freeze for Binance.US, a trading platform owned by Binance Holdings founder Changpeng Zhao, accused of allegedly mishandling customer funds, misleading investors and regulators, and breaking securities rules.
Binance.US, fighting the SEC’s lawsuit and stating that customer assets are safe, argued that blocking the flow of all funds would cripple its business and hurt customers.
Federal Judge Calls For Compromise In Binance.US Asset Freeze Battle
According to a Bloomberg report, US District Judge Amy Berman Jackson said on Tuesday that the two sides “aren’t that far apart” on protecting billions of dollars of customer funds without shutting the exchange down while the SEC’s lawsuit proceeds. She referred them to a magistrate judge to work on a compromise agreement.
Binance.US had proposed a compromise that would include transferring US customer crypto assets to new wallets with new private keys under US-based officers’ sole control on the platform. The exchange argued that it needs to be able to cover ordinary business expenses such as payments for rent, salaries, vendors, and software licensing.
During the hearing, the judge agreed with Binance.US that shutting it down completely would create significant consequences for the company and the digital asset markets in general. She stated that the magistrate judge better handles the “nitty-gritty” of the compromise.
Furthermore, the company has requested permission to continue paying employees and covering operating costs as part of its proposal to avoid a complete asset freeze on the cryptocurrency trading platform.
During the hearing, one SEC attorney said the regulator is open to a “narrowly-tailored exception” to any freeze allowing Binance.US to cover its operations. The regulator asked that Binance.US provide an accounting of its business expenses and professional fees to understand better what would be required to keep operating the platform. The judge ordered the company to file a list of its business expenses by Wednesday.
Moreover, in its compromise proposal filed with the court, the SEC asked that Binance repatriate customer assets to the US, where they would be under the control of entities outside the reach of Binance Holdings founder Changpeng Zhao and can handle redemptions for customers.
Overall, the negotiations between Binance.US and the SEC highlight the challenges faced by the cryptocurrency industry and exchanges operating under the view of the US watchdog as it grapples with increased regulatory scrutiny. The industry will closely watch the outcome of the negotiations as it seeks to comply with regulations and maintain credibility in the market.
Featured image from Unsplash, chart from TradingView.com