The ongoing SEC probe on Binance’s BNB token could pave way for a larger regulatory move going forward. Last month, the catastrophic meltdown of the Terra network meant an ever growing regulatory pressure on the stablecoin market as a whole.

The Securities and Exchange Commission (SEC) is inquiring if Binance’s initial coin offering (ICO) broke the securities rules. The news of an investigation into the exchange token resulted in a 6.9% drop in its price. As of writing, BNB is trading at $282 as against a 24 hour high of $305.

What Are Exchange Tokens?

Cryptocurrency exchanges, both centralized and decentralized types alike, make use of exchange tokens. These tokens are used for transaction fee payments, liquidity rewards and user rewards as utilities.

Just like other cryptocurrencies, the exchange tokens https://coingape.com/cryptocurrency-exchange-tokens-well/ also grow in valuation over time. The inherent value of these tokens is driven by their utility on various crypto exchanges.

However, these tokens are known to grow exponentially within short time. Besides, this category is bound to bear the brunt of regulatory hurdles.

Huge Growth In Exchange Tokens

Hxro, a native token of a crypto options trading platform, grew by a staggering 130 times since late 2019. From having a market cap of just $750,470 in November 2019 to $101 million currently, the token grew leaps and bounds.
Between the same period, BNB grew by as much as 18 times. From a market cap of $2.42 billion in May 2020 to current market cap of $48 billion, the token saw massive growth.

Meanwhile, some traders said regulatory concerns were always looming over the exchange token category. Sassal, a crypto investor, asked why people were surprised that the SEC thinks BNB is a security. He tweeted,

“I think BNB is the most obvious security in crypto. I mean, it lives or dies based on the activities of one centralized mega-company that owns most of the supply.”