Author: Yueqi Yang
Compiler: Block unicorn
Welcome to the official start of experiencing the regulatory vacuum of the Bit industry. This is the situation we are in now, as the largest Bit exchange in the US, Coinbase, has stated that it has reached an agreement with the staff of the US Securities and Exchange Commission (SEC) to dismiss the lawsuit accusing the company of operating an illegal securities exchange (at least that's what Coinbase says - we'll have to wait for the SEC to confirm this news after the commission votes).
On Friday morning US time last week, Coinbase's stock price rose 2.2%. This news has triggered an important breakthrough in the regulation of the Bit industry, especially after the SEC decided to drop its long-standing lawsuit against Coinbase, the Bit industry seems to have entered a regulatory vacuum period. In a post on X, Coinbase CEO Brian Armstrong said that the dismissal means that Coinbase will not pay any fines and will not make any changes to its business, and added that the company has spent about $50 million to litigate this case.
It appears that the top financial regulatory agency is temporarily suspending the enforcement of securities rules that have been in place for a decade related to Bits, as it waits for Congress to enact new rules - if Congress can pass any rules at all. And these Congressional deliberations are likely to drag on for some time. Basically, Bit companies have been promised regulatory exemptions while Trump's Bit task force tries to figure out the industry's next steps.
While all this sounds optimistic for the Bit industry, things are not all rosy. We saw a reminder of the risks facing the Bit industry today: just two hours after Coinbase released the good news, Bybit, the world's third-largest Bit exchange, confirmed that it had suffered a hacker attack of over $100 million, the largest hacker incident in Bit history.
When such hacker attacks occur, panicked investors may withdraw their funds en masse, and if the exchange does not have enough funds to meet withdrawal requests, this could be fatal to the exchange. Currently, Bybit CEO Ben Zhou says the exchange has enough funds to cover the amount stolen, and is still processing withdrawals normally. Nevertheless, the prices of Bit and Ethereum have both fallen, and Coinbase's stock price - which had risen in the morning on the news of the SEC's action - fell 8% in afternoon trading.
It may take days or weeks for the situation to become clear, and any ripple effects to emerge. In addition to revealing the inherent risks of Bits, this hacker attack also shows that the existing protective measures of traditional financial institutions can protect them from the risks of Bits. This is a consolation for banks and traditional securities exchanges that are still under the strict regulation of the SEC and federal banking regulators.
These companies have been arguing that the Bit industry currently has an unfair advantage in terms of regulation. For example, Nasdaq complained earlier this month when it met with the task force, asking the SEC to set a clear deadline for this "laissez-faire" state of Bit exchanges. This exchange giant had previously expressed a desire to launch a Bit business. Banks also hope to offer Bit services to institutional traders and investors, possibly to avoid losing customers interested in Bits to Bit exchanges and trading companies. But they still need the approval of banking regulators to do so.
This week, a heavyweight coalition of bank lobbying groups has asked the Trump administration to find a way to ensure they don't miss out on this game. This series of events not only highlights the vulnerability of the Bit industry, but also reflects the advantages of traditional financial institutions in terms of regulation and protection measures. As the Bit market continues to evolve and the regulatory environment takes shape, how to balance innovation and risk will remain a concern worth watching.
