Analysts at Mizuho warned on Tuesday that the US Securities and Exchange Commission's lawsuit against the world's largest cryptocurrency platform, Binance, includes language that could jeopardize a third of Coinbase's current sales.
The SEC lawsuit against Binance alleges that the company illegally engaged in unrecorded offerings and sales of digital asset securities.
Mizuho analysts argued in a note to clients that the language indicates that the SEC views so-called altcoins — or alternatives to bitcoin as, in fact, securities. This may mean that the authorities will deal with these currencies in a manner more similar to the way they deal with stocks.
Mizuho analysts note that Gary Gensler, chairman of the Securities and Exchange Commission (SEC), recently stated that everything other than bitcoin should be considered a security.
With this development in mind, Mizuho analysts noted that altcoins may soon require registration with US regulators, adding that the cumbersome process, and the risk of the tokens being discontinued could hinder Coinbase's ability to generate revenue from transactions.
On Monday, the Securities and Exchange Commission (SEC) issued thirteen civil charges against Binance, including allegations that the company diverted customer funds to a business entity controlled by CEO Changpeng Zhao. The SEC added that the trading firm had also engaged in manipulation to inflate Binance trading volumes.
The SEC complaint also said that Binance operated unregistered platforms and provided authorities with misleading information regarding its trading controls.
Binance denied the allegations, saying that the assets of users on its US platform had never been compromised. But it has indicated that it will comply with the SEC investigators' requests.
Bitcoin's value hovered near a 2-1/2 month low on Tuesday, while other altcoins such as Ethereum and Cardano also fell.
Meanwhile, shares in Coinbase rose slightly in pre-market trading in the US.