S27: SEC Crackdown on Exchanges; is your money safe?

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Introduction

three scenarios happened in the past week that i will like to share with you

1. someone was blocked from using a coinbase account with a balance of $18,000 worth of BTC

2. Binance.US was sued by SEC and their asset was frozen

3. Coinbase was sued by SEC

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SEC crackdown on Exchanges

(SEC) security exchange commission is a financial watchdog, they slammed 13 charges against Binance, the biggest exchange platform in the whole world and its founder CZ. for misusing customer's fund and operating an unregistered trading platform in the US hereby risking many investors money.

"Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law," said SEC Chair Gary Gensler, in a statement. "They attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes so they could keep high-value U.S. customers on their platforms."

Coinbase was also sued by SEC for violating US Securities law,

Who is SEC

SEC is the financial watchdog, their job is to protect investors, and maintain fair, orderly, and efficient markets, and facilitate capital formation, they are here to promote a market environment that you can trust. because of this they are incharge of

1. making sure business entity meet up with the requirement necessary to provide financial services to people

2. they make sure businesses doesn't violate the federal securities law

3. they conduct investigation to perceived platform at will

4. They provide regulatory policy and guidelines to companies and entrepreneur to access capital market to help create jobs, develop life changing innovations and technology and provide financial opportunities for those that invest in them.

What are securities

1. securities are fungible, tradable financial instrument that holds some type of monetary value.

2. securities are used to raise capital in public and private markets

3. their are 3 types of securities;

   1. Equity: provides ownership right to holders

   2. Debt: These are loans repaid periodically

   3. Hybrid: combines aspect of Equity and Debt

4. Public sales of security are regulated by SEC

Howey's Test is used to define asset that meets up securities coined in 1946 in the case of Howey vs SEC. it states that, for an asset to be a security, it must satisfy Howey's Test i.e.

1. There is an investment of money

2. The investment is made into a common enterprise

3. The investor's expect to make profit from their investment

4. Any expected profit or return are due to the action of a third party or promoter

Regulation is coming to crypto

Regardless of the market situation, regulation is coming to crypto and the giants are the first target, but these solely depend on who is in custody of your money! the custodian of your money defines the fate of your money.

Take a minute to reflect, Imagine that Bitcoin founder is not anonymous, just imagine!

Not your key, not your coin

in crypto, you need to signup to a platform or an app that provides you your

1. public address

2. private key or seed phrase

How do you use an exchange platform

NB: exchange is a custodian platform, they could be dubious because they provide tokenise version of your money. this is the reason Binance introduce proof of solvency. consider that you go to the market, you buy what you need to buy and you left the goods you purchase in the market. who does that?

What you need to know before you use an exchange

1. you need to have your own personal wallet, don't use an exchange as your wallet

2. deposit the money you have to an exchange, buy the asset of your choice

3. withdraw your asset to your personal wallet.

Conclusion

SEC against Binance will not be the last, and you can't fully trust a third party platform, regardless of the reason SEC is cracking down of Binance and coinbase, all know this; your money is most safe with you.