Binance is anticipated to finalize a deal with the U.S. Securities and Exchange Commission (SEC) before Thursday to avoid an asset freeze.
U.S. District Court Judge Amy Berman Jackson said on Tuesday that there isn't a significant dispute between Binance and the SEC on protecting billions of dollars of client funds, adding that she wouldn't shut down the Binance exchange during the lawsuit.
A negotiation is set to take place between Binance and the SEC, with Jackson appointing a local magistrate judge as mediator and asking for final details to be confirmed by Thursday.
Jackson stated that she doesn't see any necessity to issue a restraining order if an agreement is reached.
Simultaneously, Jackson asked Binance's U.S. cryptocurrency trading platform, Binance US, to submit a list of "general project expenses" by Wednesday morning Eastern Time.
The SEC proposed freezing assets of Binance's subsidiary, BAM Trading Services, and repatriating its management team on Tuesday. BAM Trading operates Binance US in conjunction with Binance.
A SEC lawyer argued that Binance carries a risk of moving customer assets overseas, hence the need to freeze assets, a suggestion that was criticized by Jackson in court.
However, according to media reports, Binance's answer regarding the outflow of funds from Binance US customers outside of the U.S. appeared to frustrate Jackson.
Earlier in the day, Jackson hinted she might be inclined to impose some restrictions on accessing Binance US assets, but not a comprehensive restraining order.
SEC lawyer Jennifer Farer told the judge on Tuesday, "We are open to them (Binance) continuing to operate."
A representative lawyer for Binance US told the judge that Binance refuses to accept a "death sentence" on the eighth day of the case hearing.
Jackson concurred, stating at a hearing that a complete shutdown would have a significant impact on Binance and the entire digital asset market.
Farer said that Binance provided different versions of the story about how it holds cryptocurrency assets and funds. Initially, Binance US told the SEC it reached an agreement with Binance US, later saying that the agreement was unworkable, and finally stating that the unworkable agreement had been halted.
Jackson also addressed the lawsuit's central question: Are crypto assets securities or are they a type of commodity? According to reports, although the judge posed some basic questions about this, she wasn't satisfied with the answers.
As the hearing was about to start, the judge asked the SEC's lawyer to distinguish between "crypto assets" and "crypto asset securities."
Another SEC representative, Matthew Scarlato, told the judge that the SEC has given examples of cryptocurrencies being securities in broader lawsuits.
Previously, Wall Street reported that since the SEC sued Binance and Coinbase, cryptocurrencies seen as unregistered securities by U.S. regulators now exceed $120 billion.
Additionally, she asked Binance US's representative lawyer, Matthew Martens, whether Binance's BNB token is a commodity.
"It's a crypto asset," Martens vaguely responded.
Last Monday, the SEC formally charged Binance and its CEO Changpeng Zhao with violating U.S. securities laws, accusing them of issuing Binance coins and stablecoin BUSD without registration, and of widespread fraud, conflicts of interest, lack of disclosure, and deliberate evasion of the law. The following day, the SEC sought an emergency asset freeze for Binance US.
In the lawsuit with the SEC, Binance US strongly stated that its customer assets are secure but argued at the hearing that stopping all fund flows would harm its business and its customers.
According to the SEC lawsuit, Binance illegally transferred billions of dollars in customer funds to bank accounts controlled by Changpeng Zhao. The regulator said these funds were first transferred to a third party and then used to trade cryptocurrencies.
As a countermeasure, Binance proposed a compromise, including moving U.S. customers' crypto assets to new wallets with new private keys, which will be controlled solely by Binance US's U.S.-based employees.
