SEC Dismisses Lawsuit Against Binance Following Launch of Trump-Backed USD1 Stablecoin on Exchange

Topline

The Securities and Exchange Commission (SEC) recently dropped a lawsuit against Binance, one of the largest cryptocurrency exchanges, in a move that coincided with Binance’s decision to list a stablecoin, USD1, developed by World Liberty Financial. Notably, this venture is linked to President Donald Trump, further intertwining the worlds of politics and cryptocurrency.

President Donald Trump delivers remarks during the swearing-in ceremony for Securities and Exchange … More Commission Chairman Paul Atkins at the White House on April 22. (Photo by Chip Somodevilla/Getty Images)

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Key Facts

Trump and his family maintain about 60% control of World Liberty Financial through an LLC. Notably, Trump is listed as the company’s chief crypto advocate and inspiration, as highlighted on the firm’s website.

On May 22, World Liberty Financial announced the trading of its USD1 stablecoin on Binance, marking a significant development for the company and the crypto market.

In November 2023, Binance, through a plea deal, admitted to anti-money laundering and sanctions violations, resulting in a hefty $4 billion settlement. Additionally, founder Changpeng “CZ” Zhao was fined $50 million and served a four-month prison sentence, later released in September.

Before the USD1 trading commenced, Zhao applied for a pardon from Trump’s Justice Department. He mentioned this on a recent podcast, reflecting the chaotic interplay between the realms of law and crypto governance.

On the same day that the SEC dropped its lawsuit against Binance, the commission released a statement that the company had not violated U.S. securities laws regarding various accusations, including misleading investors and improper fund commingling.

World Liberty Financial And Binance Respond

David Wachsman, a spokesperson for World Liberty Financial, asserted that the company operates completely independently from the government and its decisions, a statement aimed at quelling any perceived connections to the Trump administration or SEC actions. In parallel, a spokesperson from Binance underscored that the SEC’s decision affirmed their contention about compliance with U.S. securities laws. Neither the SEC nor the White House provided any additional comments regarding the matter.

Chief Critic

In 2023, then-Treasury Secretary Janet Yellen admonished Binance for overlooking legal requirements, suggesting that its negligence indirectly contributed to illicit activities such as funding terrorism and cybercrime through its platform, highlighting the vital need for strict regulatory oversight in the crypto landscape.

Crucial Quote

In a light-hearted moment during a podcast, Zhao remarked, “I certainly wouldn’t mind one,” in reference to a pardon, illustrating his desire for leniency regarding his legal troubles amid the charged political climate.

Key Background

Trump has structured his business operations through the Donald J. Trump Revocable Trust, allowing him to benefit from his businesses while in office. Notably, his family retains significant control over business deals, including those intimately connected to the burgeoning crypto industry—now referred to as the potential “crypto capital of the world.”

What Are Decentralized Finance And Stablecoins?

Decentralized finance (DeFi), as exemplified by companies like World Liberty Financial, enables users to conduct transactions without relying on traditional banks. Stablecoins, like USD1, are unique digital currencies tethered to conventional assets, typically maintaining a stable value. Their profitability largely stems from transaction fees and interest accrued from user deposits.

Contra

There is no substantiated evidence that World Liberty Financial and Binance engaged in discussions regarding the SEC lawsuit, the plea agreement, or Zhao’s pardon application. Nevertheless, Binance is not alone in navigating the complexities tied to Trump’s crypto interests, as other partners in the crypto space have experienced similar benefits and scrutiny under his administration.

What To Watch For

Democratic senators, including Elizabeth Warren, have escalated inquiries concerning any potential communications between the Justice Department and Zhao regarding the pardon request. Awaiting responses, the Senate Banking Committee will revisit this subject post-recess, underscoring the ongoing examination of cryptocurrency practices amid evolving regulatory frameworks.

News Peg

Recently, the Genius Act—a proposed legislation designed to establish a regulatory framework for stablecoins—survived a significant procedural hurdle in the Senate, garnering bipartisan support amid concerns over the potential for financial instability in the crypto sector.

Surprising Fact

Interestingly, while Binance lists USD1, it does not have operations within the United States. Its U.S. subsidiary, Binance.us, refrains from listing the president’s stablecoin, raising questions around regulatory compliance and market strategy.

Big Number

As of the latest reports, USD1 boasts a market capitalization of $2.15 billion, positioning it as the 49th most popular stablecoin, reflecting its rapid entry into a competitive market.

Tangent

In a notable trend, USD1 is not the first stablecoin introduced by a troubled exchange under scrutiny. Following Binance’s listing, KuCoin also added USD1 to its platform, despite recently pleading guilty to operating an unlicensed money-transmitting business.

Forbes Valuation

Recent estimates suggest Donald Trump’s net worth is approximately $5 billion, significantly bolstered by his media holdings, while Changpeng Zhao’s wealth is assessed at around $67.2 billion, reflecting the immense financial stakes involved in the evolving crypto sector.