At the end of each year, one of the major crypto exchanges, according to tradition, has problems. In 2022, the industry was shocked by the collapse of FTX. In 2023, Binance was forced to change management and pay unprecedented billions of dollars to the US treasury. What to expect next?
What exactly is Binance accused of?
The main violation charged by Binance and directly to its co-founder Changpeng Zhao is, according to the US Department of Justice, non-compliance with international anti-money laundering (AML) rules.. The world's largest crypto exchange ignored a regulation requiring American citizens to confirm their location. This led to the fact that from 2018 to May 2022, almost $1 billion in transactions were carried out on Binance with sanctioned organizations and states, including Hamas, North Korea, Iran, the Islamic State. Such operations are expressly prohibited by American law.
Law enforcement officials insist: Zhao knew about the situation. If only because back in 2019, in one of the chats he left a message: “It’s better to ask for forgiveness than for permission.”. In other words, the implication is that it is easier to break the law and then apologize than to try to convince the authorities of the need to allow free trade with all participants.
What threatens Zhao and Binance?
What threatens Zhao?
The first thing the billionaire committed to do and did was to leave the post of CEO of the crypto exchange. At the same time, Zhao still has a stake in Binance, that is, it is unlikely that anyone will prohibit him from influencing decision-making.. In any case, de facto, not de jure.
Second , the businessman is obliged to pay the American treasury a $50 million fine.. Considering the fact that the fortune of one of the richest people on the planet is estimated at more than $10 billion, the circumstance is unlikely to become insurmountable.
Third , they want to sentence Zhao to one and a half years in prison. This is the maximum sentence for the above violations provided for by US federal law.. It is quite possible that the scenario will repeat with BitMEX CEO Arthur Hayes, who was charged with two years of supervision instead of prison for violating AML.
Fourth – Zhao must appear in court on February 23, 2024. Until then, he is released on bail of $175 million.. As far as we know, Changpeng Zhao lives in the United Arab Emirates. This state does not have a mutual extradition treaty with the United States.. True, in 2022 an agreement was signed on the exchange of evidence between law enforcement agencies of the two countries (law-enforcement evidence).
What threatens Binance
Binance must pay $4.32 billion in fines. The first tranche of $1.81 billion should be transferred to the US Treasury within 15 months. The remaining $2.51 billion will be confiscated later, according to the terms of the deal with the United States Department of Justice.
The exchange will have to leave the American market. In addition, Binance will be subject to strict monitoring for five years to ensure compliance with AML and compliance with the sanctions that have been imposed on it.
What's next for the exchange?
What will happen to Binance
The reputation of the crypto exchange has suffered quite a serious blow.. Surely a significant proportion of clients will switch to other trading platforms. At a minimum, this is to be expected for US residents.. In this regard, Binance will have to focus on other markets, such as Asia.
After Changpeng Zhao's departure, the exchange will have a new CEO. According to the announcement, this will be Richard Teng, former director of regional markets at Binance..
A number of experts and traders believe that the Binance scandal will push the US Securities and Exchange Commission (SEC) to more quickly approve spot Bitcoin ETFs. Here, for example, is what economist and crypto trader Alex Kruger thinks about this:
“There is no more uncertainty with Binance, its activities will now be monitored by an independent supervisor. Much higher chances of ETF approval. I am waiting for the market to agree with the opinion that the trend is bullish.”
How did the value of cryptocurrencies change after the news about Binance?
The situation on the crypto markets
The first reaction was negative. Binance's native token, BNB, has lost almost 11% in value.. If we count not from the opening, but from the high of the day, then the decrease was generally 17%. However, by the middle of the day on November 22, the coin won back its losses, adding more than 3.5%.
Source: tradingview.com
A similar situation was observed with the first cryptocurrency by capitalization – Bitcoin.. Panic on Tuesday November 21st led to a decline of 4.59%. The price dropped below $36,000. However, already on November 22, BTC regained 2.2% and is trading above $36,500.
Source: tradingview.com
It is also worth noting the situation on Binance itself. Within a day after the news about the fine and Zhao’s departure appeared, the total outflow of funds from the platform amounted to more than $1 billion.
Source: defillama.com
Conclusion
To summarize: the result of the charges brought against Binance for the first time several years ago was a fine of $4.3 billion and the resignation of the most influential crypto businessman Changpeng Zhao from the post of CEO. The site is already losing a certain part of its customer base and seems to be focusing on the Asian market. At the same time, its complete collapse is unlikely.. A number of experts believe that Binance's problems will lead to accelerated adoption of Bitcoin spot ETFs. Cryptocurrencies fell in price on November 21, but the very next day they began to win back losses.