Bitcoin stabilised above US$25 000 on Tuesday after a steep dive overnight, as investors grappled with news that the US securities regulator sued crypto exchange Binance, dealing a severe blow to the industry.

Bitcoin, the world’s largest cryptocurrency, was last at $25 797, up 0.2% in Asian trade on Tuesday, pinned near a more than two-month low. It had slumped more than 5% in the previous session, the largest daily decline since 19 April.

The US Securities and Exchange Commission late on Monday sued Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao for secretly controlling Binance.US as part of a “web of deception” to evade US laws, among other charges.

“It’s another blow to the crypto industry and the crypto exchanges of the world,” said Tony Sycamore, market analyst at IG Markets. “If what [the SEC is] alleging is true … well, Binance is the biggest, and if this is going on at the biggest, what’s happening at the smallest? That is the natural link. It doesn’t fill investors with confidence.”

Binance’s cyptocurrency was at a near three-month low of $277.07, after a 9.2% plunge on Monday.

Reuters earlier reported that Binance controlled its US affiliate’s bank accounts, despite claiming it was independent.

In statements, Binance said it had been cooperating with the SEC’s probes and had “worked hard to answer their questions and address their concerns” including by trying to reach a negotiated settlement.

The 24-hour trading volume on Binance spiked in Asia hours on Tuesday and more than doubled to $12.48-billion, based on analytics site CoinMarketCap.

Sweeping crackdown

The lawsuit against Binance marks the latest development in the SEC’s sweeping crackdown on the crypto industry following FTX’s implosion last year, which has since prompted some crypto companies to increase compliance measures, spike products and expand outside the US.

“This case is significant, and the crypto and fintech industries should pay close attention to its impact,” said Wayne Huang, co-founder and CEO of XREX, a blockchain-enabled financial institution operating the XREX USD-crypto exchange. — Rae Wee, (c) 2023 Reuters