The Unexpected Turn in Crypto Politics

The Securities and Exchange Commission (SEC) made a surprising move by dropping its lawsuit against the crypto exchange Binance. This decision came just days after Binance started trading a new stablecoin created by World Liberty Financial, a company with strong ties to former President Donald Trump. This stablecoin, called USD1, is designed to match the value of the U. S. dollar. World Liberty Financial is largely controlled by Trump and his family, who own about 60% of the company through a limited liability company. Trump is also listed as the chief advocate and inspiration for the decentralized finance platform. The stablecoin USD1 began trading on Binance on May 22, marking a significant moment in the crypto world. Binance, the largest crypto exchange globally, has had its share of legal troubles. In November 2023, the exchange admitted to anti-money laundering and sanctions violations, agreeing to pay a hefty $4 billion fine. The founder, Changpeng "CZ" Zhao, also pleaded guilty, paid a $50 million fine, and faced four months in prison. Before the stablecoin started trading on Binance, Zhao had applied for a pardon from Trump’s Justice Department. The SEC's lawsuit against Binance accused the exchange of failing to restrict high-net-worth individuals, misleading investors about trading controls, and commingling funds. The lawsuit was voluntarily dismissed by the SEC on Thursday, just days after the stablecoin started trading on Binance. The SEC's decision to drop the lawsuit raises questions about the influence of political connections in the crypto world. Critics have pointed out that Binance's legal troubles highlight the need for stricter regulations in the crypto industry. The exchange has been accused of turning a blind eye to its legal obligations, allowing money to flow to various illegal activities. The stablecoin USD1 is part of the decentralized finance (DeFi) platform, which allows users to trade, borrow, and lend crypto without the need for traditional banks. Stablecoins like USD1 are digital currencies pegged to traditional assets, such as the U. S. dollar. The issuers of these stablecoins often profit from trading fees and interest earned on deposits. The SEC's decision to drop the lawsuit against Binance comes at a time when the crypto industry is facing increased scrutiny. Democratic senators have asked for details about any communications between Zhao and the Justice Department regarding a pardon. The Genius Act, a bill aimed at creating a regulatory framework for stablecoins, recently cleared a procedural hurdle in the Senate. Critics argue that passing this bill could lead to a spike in stablecoin usage without adequate safeguards, potentially leading to a crypto collapse that would require a taxpayer bailout. Meanwhile, Binance is not the only crypto exchange to list USD1. KuCoin, another troubled exchange, also began trading the stablecoin this month. KuCoin pleaded guilty to operating an unlicensed money-transmitting business and agreed to pay nearly $300 million in penalties. The market cap of USD1 is $2. 15 billion, making it the 49th most popular stablecoin. Despite its popularity, Binance does not operate in the United States, although its U. S. subsidiary, Binance. us, does not list the president’s stablecoin. The SEC's decision to drop the lawsuit against Binance highlights the complex interplay between politics and the crypto industry. As the industry continues to evolve, it is crucial to ensure that regulations keep pace with technological advancements.