In just six years, Changpeng “CZ” Zhao transformed Binance from a startup funded by a $15 million ICO into a $60 billion titan of the crypto world. His recent resignation as CEO, part of a deal with the U.S. Department of Justice, marks a significant moment not only for Binance but for the broader crypto industry.
This event is part of a larger scrutiny faced by key players in the crypto space, with Kraken and Coinbase also facing legal challenges from U.S. authorities for various regulatory issues.
The crypto landscape is clearly in a state of flux, with regulatory actions signaling a shift towards more stringent oversight.
This period of change is evident in the diverse developments across the industry, from Grayscale and BlackRock’s dealings with the SEC to Circle’s new initiatives, Bittrex Global’s closure, and CoinGecko’s latest acquisition.
What happened to Binance?
Binance, under its CEO Changpeng “CZ” Zhao, agreed to a $4.3 billion settlement with U.S. officials for failing to implement adequate safeguards against illicit activities.
U.S. authorities accused Binance of allowing criminals to transfer stolen funds through the exchange.
As part of the settlement, Binance will pay significant penalties to various U.S. departments, including over $3.4 billion to the Financial Crimes Enforcement Network and around $1 billion to the Treasury’s Office of Foreign Assets Control.
Additionally, Binance and CZ will face stringent monitoring and reporting requirements moving forward. This settlement resolves many civil and criminal investigations into Binance, but a civil case with the SEC remains pending.
Following the settlement with U.S. officials, Changpeng “CZ” Zhao has decided to step down from his role as chair of the board for Binance.US, distancing himself from the exchange’s governance.
This move aligns with his earlier resignation as Binance CEO after pleading guilty to a felony charge related to anti-money laundering deficiencies.
Binance.US, led by Norman Reed, remains separate from these legal issues but is still involved in an SEC lawsuit. CZ’s future involvement in the crypto industry and his legal status, particularly his travel permissions while awaiting sentencing, are currently under consideration by the court.
Binance’s mistakes may be reflected in the industry standards
The recent $4.3 billion settlement of a major cryptocurrency exchange with the U.S. Department of Justice is being viewed positively by industry experts.
This settlement is seen as a step towards reducing apprehensions about engaging with this global exchange, thereby potentially enhancing its trustworthiness in the eyes of investors and users.
Industry observers point out the significance of adhering to regulatory standards, emphasizing that even traditional financial institutions have faced similar challenges. The resolution of the exchange’s compliance issues, particularly around KYC protocols, is considered a positive move for its future operations and for the cryptocurrency industry at large.
Looking ahead, there is growing optimism about the future of Bitcoin.
Expectations are high for the approval of a Bitcoin exchange-traded fund (ETF) in the United States, and the anticipated Bitcoin halving in 2024 is also drawing attention.
These factors, combined with the potential for reduced interest rates by the Federal Reserve, are expected to positively influence Bitcoin’s value.
Furthermore, the forthcoming U.S. elections and ongoing fiscal challenges in major global economies are seen as factors that could increase Bitcoin’s attractiveness as an investment option.
Binance’s future plans
End support for BUSD
Binance has outlined its plan to phase out support for Binance USD (BUSD) products.
Beginning December 15, Binance will no longer support the minting of new BUSD coins, following a decision by Paxos to stop its production.
Users are advised to either withdraw or convert their BUSD into other assets on the exchange before this date.
After December 31, Binance will deactivate BUSD withdrawals, and any remaining BUSD balances will be automatically converted to First Digital USD (FDUSD) for certain users.
This decision is part of Binance’s broader strategy to gradually reduce its reliance on BUSD.
Initially, the exchange will discontinue borrowing and lending services for BUSD, with complete support cessation planned by February 2024.
This move follows regulatory challenges, including the U.S. Securities and Exchange Commission labeling BUSD as an unregistered security and the New York Department of Financial Services ordering a halt to its issuance.
The change in strategy coincides with significant shifts within Binance, including a $4.3 billion settlement with U.S. authorities and a leadership transition, with the former CEO stepping down and the head of regional markets assuming the role.
Once one of the largest stablecoins in terms of market capitalization, BUSD has seen a significant decrease in value over the past year.
Binance to end support for crypto card in Europe
Binance, facing increased regulatory scrutiny globally, is set to end its crypto card services in the European Economic Area (EEA).
The service, which allowed for the direct conversion of digital assets in Binance accounts to local fiat currency, will cease from midnight (UTC+0) on December 20, 2023, affecting all 27 EU member states and others like Iceland, Lichtenstein, and Norway.
Binance’s decision follows the discontinuation of the service by UAB “Finansines passages ‘Contis,’” the issuer of the Binance Visa Debit card.
This change will not affect the accounts of EEA residents but will end the Refugee Crypto Card service introduced for Ukrainian refugees.
The discontinuation in the EEA, alongside earlier service stoppages in Latin America and the Middle East, reflects the challenges Binance faces, including the loss of operating licenses in several countries and ongoing legal battles with regulatory bodies like the SEC.
Binance launches pilot program for bank custody of collateral
Binance has launched a pilot program allowing institutions to trade without depositing collateral directly on the exchange.
This innovative approach enables banks to keep trading collateral off-exchange, such as at a third-party bank, reducing counterparty risk.
The program, mirroring traditional financial market practices, offers flexibility for institutions to manage their crypto-asset allocation according to their risk tolerance. Institutions can hold collateral in cash or Treasury bonds, earning yields while trading.
This initiative, in development for over a year, aims to address institutional investors’ concerns about counterparty risk – the risk of a party defaulting on its contractual obligations.
By not requiring crypto or cash deposits on the exchange, the program lessens the risk of asset loss due to potential exchange issues.
Binance plans to expand this program, engaging with banking partners and institutional investors interested in participating. This move by Binance follows similar efforts by other exchanges to enhance security and trust in crypto trading.