Binance, the global titan of cryptocurrency exchanges, is currently navigating turbulent waters. At the heart of the storm is its native cryptocurrency, BNB, which has recently faced significant challenges, both in terms of its market value and its standing with regulatory bodies.

The Regulatory Onslaught
Binance's BNB, once a shining star in the crypto universe, has witnessed a decline in its market value by a staggering $10 billion since early June. This downturn was triggered by the US Securities and Exchange Commission's (SEC) lawsuit against Binance. The SEC's primary contention? BNB might be an unregistered security. This legal action has cast a shadow over BNB's future, and the repercussions are being felt far and wide. Following the SEC's move, Binance has also encountered regulatory hurdles in European nations like Belgium, the Netherlands, and France.

Screenshot from CoinMarketCap dated 23/08/2023 showing the dip in price.

BNB's Meteoric Rise
Despite the recent challenges, it's essential to remember BNB's incredible journey. Launched in 2017, BNB's value skyrocketed by approximately 1,300% in 2021 alone, touching a peak market value of around $110 billion. BNB isn't just another cryptocurrency; it's integral to Binance's ecosystem. The exchange incentivizes the use of BNB by offering discounts to users transacting with it. Moreover, BNB constitutes about 5.2% of Binance's total customer assets, which are valued at over $55 billion.

The Implications of the SEC Lawsuit
The SEC's lawsuit has introduced a cloud of uncertainty over BNB's future. If BNB is officially labeled a security, it could face challenges in being listed or traded on other exchanges. This potential classification has led some experts, like Patrick Tan from ChainArgos, to describe BNB as a potential "hot potato" in the crypto market. Additionally, Binance's trading volume, which directly impacts BNB's value, has suffered due to these regulatory challenges.

Comparisons with FTT
While BNB faces its challenges, it's crucial to differentiate its situation from that of FTT, the token of the FTX exchange. FTT's collapse played a role in the downfall of the FTX exchange, but experts believe Binance's scenario is distinct. BNB's use is primarily limited to Binance's platforms, meaning its potential collapse might not have a widespread impact on the broader crypto industry.

The Road Ahead
Binance's CEO, Changpeng "CZ" Zhao, has a personal stake in BNB, and the token also forms part of Binance's emergency fund. The exact composition of Binance's corporate assets in BNB remains undisclosed. However, the recent challenges surrounding BNB serve as a potent reminder of the volatile nature of the crypto world and the inherent risks of building an empire on digital assets.