Recent action by the SEC against Binance and Coinbase has sent crypto into a tailspin.

There have long been fears that the U.S. was never going to get crypto right, but could this be the final nail in crypto’s American coffin? Or do some people just enjoy kicking things when they’re down?

More in the deep dive.

Espresso Shots

☕️ Senators Join Binance Dogpile 🏛 🐕

Senator Elizabeth Warren wants the Justice Department to investigate whether Binance blatantly lied to Congress in an investigation into the separation between Binance and Binance.us.

Senator Warren (D-Mass.) coauthored a letter with Senator Chris Van Hollen (D-Md.) calling for a review of Changpeng Zhao and Binance’s earlier statements regarding American compliance.

This isn’t the first letter that Hollen and Warren have sent to Binance. They wrote a similar missive in March, this one also coauthored by Senator Roger Marshall (R-Kansas).

This March letter indicated doubts about the relationship between Binance and Binance.us, alleging that Binance “purposefully evaded regulators, moved assets to criminals and sanctions evaders and hidden basic financial information from its customers and the public,” according to an initial report by The Wall Street Journal.

Now that Binance has received two angry notices from Elizabeth Warren, her next message will be anonymous, and won’t be a formal letter so much as a ransom-note-style threat made of letters cut out from magazines.

☕️ Binance wants Gensler Recused 🪙 ✖

Binance’s lawyers are arguing that SEC Chairperson Gary Gensler should be recused from the SEC case against the firm, since he once attempted to become an advisor at Binance.

In a June 4 letter to the SEC, Binance wrote: “As we conveyed nearly four months ago, Mr. Gensler should have been recused from any consideration in this matter based on this history and the prospect that Mr. Gensler may be a material fact witness.”

In addition to the prospective position, Gensler and Changpeng Zhao had lunch in 2019 followed by ongoing communication in which Gensler acted as an informal advisor.

Binance feels confident that this should compromise Gensler as a witness.

Unofficially, Coinbase may try a similar tactic, arguing that if Brian Armstrong and Gary Gensler go head-to-head in court, the sparks from their bald pates rubbing together may cause wildfires.

☕️ UK’s Crypto Cool-Off 🇬🇧 🧊

England’s Financial Conduct Authority has introduced new measures which would create a mandatory, 24-hour “cool-off” period between when crypto is requested for purchase and the purchase itself.

Following the EU’s approval of Markets in Crypto-Assets Regulation (MiCA) it was to be expected that some nations would further implement their own regulatory framework to smooth crypto’s transition into mainstream, European finance.

In an interview with FTA Advisor, Susan Streeter, head of money and markets at Hargreaves Lansdown, a British financial services company, spoke to the motivations behind the new cool-off period.

"Relentless warnings about the dangers of pouring money into high-risk investments are clearly not working, and with crypto turning mainstream, the regulator is flexing its newly-found muscles to help police the space," said Steeler.

And those warnings are the result of concerned FCA members who feel that crypto is closer to gambling than traditional finance, and want it to be regulated as such.

Streeter feels that this new measure is an attempt to placate those concerned parties, but has her own doubts that it will satisfy them.

“It’s clear the FCA recognizes the damage that can be done to overall investor confidence when such high-risk investments are bought by people who seem woefully unaware of the risks,” Streeter continued.

The UK’s 24-hour cool-off mandate brings to mind the 10-second cool-off our own mothers enforced, the period for self-reflection between when you realize you’re losing at a game and when you throw that game on the ground.

Spilling the Beans

Is Crypto in America Dead? 🇺🇸 💀

American crypto may be on death’s door.

You might say that crypto in America has been sick for a long time.

It seemed like we were flourishing, money and attention were pouring in. But then, in November 2022, something awful happened.

American crypto got a deadly dose of FTX-contagion, and started coughing blood into its handkerchief.

Crypto went mainstream, but not like we would have hoped. Everyone’s worst fears that crypto was a scam or a scheme seemed to be confirmed on an international stage.

FTX contagion plunged the market into crypto winter and things looked… really dire.

And then, miraculously, we somewhat recovered.

Market prices shot back up and thawed as we headed into crypto spring, and things seem to have somewhat stabilized.

And then this week, crypto was back in the mainstream news, and it wasn’t for finding a lost kid in a well or winning a hot-dog-eating contest.

Binance was sued by the SEC on Monday. On Tuesday, Coinbase was sued by the SEC.

Two of the biggest exchanges in the world, both told that they’re going to have to seriously rethink things if they want to remain on American soil.

But before we start fitting Coinbase and Binance for exchange-sized coffins, we need to consider the source.

These lawsuits are being handed down by Gary Gensler and the SEC.

The SEC is much more powerful than your garden variety Homeowners Association, but they’re not the ultimate authority.

The SEC is a regulatory body, an arm of the federal government that’s supposed to prevent market manipulation. That’s it.

And keep in mind, these “rulings” on crypto aren’t being handed down by elected officials. The members of the SEC are appointed. 

It’s an important distinction. Zealous bureaucrats at the SEC like Gensler probably find themselves delighted to occupy such a prominent position in the debate around American crypto.

This is America, it’s a democracy, and the most important figures in our politics are elected. The SEC and bodies like it are secondary effects, they’re manifestations of the wills of our elected officials.

So no, we don’t think it’s time to panic quite yet. A significant portion of both the Binance and Coinbase cases are securities violations.

We’ve seen these actions before. They usually result in fines, or in Ripple’s circumstances, years of deliberation.

Of course, there are aspects of the Binance lawsuit that seem far nastier and more illegal than the unregistered securities violations we’ve all become familiar with.

But those charges are on an individual basis. It was Changpeng Zhao and some top executives who were commingling funds and funneling them through Merit Peak.

CZ and those responsible will have to take responsibility for that, even if it means jail time. And Binance, much like FTX, will probably continue soldiering on after some restructuring.

For now, no matter what you hear in American news outlets, we suggest taking a page out of the book of Mike Dudas, co-founder of The Block.

Stay strong, because no matter how public those growing pains are, crypto’s here to stay.

Meme of the Day

Looks like everyone wants a piece of CZ... 👀

Crypto 101

Jager: This is the smallest increment of Binance’s native token (BNB).

A Jager is divisible by eight decimal points, so, equal to .00000001 BNB.

Similarly “Satoshis” are the smallest increments of Bitcoin.

We’re quietly referring to these denominations in our heads as “tiny tokens,” but nobody in crypto calls them that.

Also, Binance Jagers have nothing to do with that gnarly, anise-flavored liqueur with the deer on it that somebody probably made you chug in college. They’re named after James Jager, Binance’s community manager.

The Last Sip

In honor of the UK’s cool-off measures to prevent novice crypto traders from making hasty decisions, we came up with three surefire ways to cool off between crypto trades:

1. Chew ice cubes. It’s like drinking, but with biting!

2. Smoke a cigarette inside! And your wife thought your vaping was a problem? Remind her of how bad it could be as you transform your shared, two-bedroom apartment into a gloomy, English pub. You’re going to look so cool and contemplative ringed in all that smoke.

3. Give yourself a cheeky little waterboard. If your crypto trading is filling you with self-doubt, anger, or a gambler’s trusty sense of dependency, take some time off with the U.S. government’s preferred method of torture. All you need is a washcloth, a recliner, and some water! Just be sure to have a spotter, as this could lead to dry drowning.

Stay Caffeinated,

Coffee & Crypto Team

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.