The $4.3 billion deal Binance signed this week with U.S. authorities introduces new complications for the world’s largest cryptocurrency exchange. However, crypto enthusiasts can be heard breathing a sigh of relief, saying the deal removes much of the uncertainty hanging over the industry.
“It’s great to wake up in crypto and not have to worry about what’s going to happen to Binance,” said Matt Hogan, chief investment officer at crypto asset management firm Bitwise, formerly known as Twitter. I spoke at X, who was there. “2024-2025 is going to be great.”
It’s great to wake up in crypto and not have to worry about what’s going to happen on Binance. 2024-2025 will be a great year.
— Matt Hougan (@Matt_Hougan) November 22, 2023
JPMorgan Chase analysts added that the settlement ends “potential systemic risks arising from a hypothetical Binance failure.”
Michael Safai, a partner at crypto trading firm Dexterity Capital, argued that Binance’s “resolution represents a path forward for cryptocurrencies and confidence that the asset class will not be forced into extinction.”
The movement of cryptocurrencies and related stocks after Binance’s announcement showed that investors generally share that optimism.
Binance’s own crypto token BNB (BNB-USD) fell 13% in the hours after the settlement announcement, showing that many challenges remain now that it is under intense government scrutiny, but on Wednesday. The prices of other currencies also recovered. Stable.
Bitcoin (BTC-USD), the world’s largest cryptocurrency, rose 1% in the 24 hours after Binance’s announcement, while Ether (ETH-USD), the second largest digital currency, rose more than 4%.
Shares of Coinbase (COIN), another major cryptocurrency exchange, also rose more than 3% on Wednesday on expectations that the company could benefit from Binance’s problems.
bull incident
The bullish case for cryptocurrencies is that its worst problems are now in the rearview mirror.
Bitcoin peaked at $68,789 in November 2021, but will continue to decline in 2022 as the Federal Reserve begins raising interest rates and a series of companies fail, including cryptocurrency exchange FTX in November 2022. It crashed.
What followed was a widespread crackdown on the cryptocurrency industry. Regulators have sued a number of major companies, including Coinbase and Binance. Earlier this month, a jury found FTX founder Sam Bankman Fried guilty of defrauding customers, lenders and investors.
Now, investors have renewed optimism that the industry is poised for broader acceptance and regulatory clarity from Washington. They expect the Securities and Exchange Commission to soon grant approval for a Spot Bitcoin ETF, which would allow investors to gain exposure to the cryptocurrency without owning Bitcoin.
BlackRock (BLK) is one of the major asset managers that recently filed to launch such a product. Grayscale Investments also made its Bitcoin trust a spot Bitcoin exchange-traded fund following an August ruling in favor of Grayscale Investments by a three-judge panel of the District of Columbia Court of Appeals. It is asking the SEC to approve the conversion.
The panel concluded that the SEC was “arbitrary and capricious” in denying Grayscale’s conversion application in 2022.
The next official milestone by which the SEC must accept or deny approval for a Spot Bitcoin ETF is January 10th, although it is possible that the SEC may approve the application sooner.
“The end of an era”
But there are several reasons for investors to be cautious. The SEC is seeking to force more players to register with regulators and classify digital assets as securities, and has pending lawsuits against some of the industry’s biggest companies, including Binance and Coinbase. It is still facing a series of lawsuits.
And the fact that Binance has to operate under strict government oversight will certainly prevent it from remaining the industry’s largest crypto exchange.
“It’s the end of an era,” said Yannis Giokas, senior director of digital assets at Moody’s Analytics. “As digital currencies become more mainstream and institutional investors enter the space, regulation and enforcement will become more stringent to ensure compliance and consumer protection.”
Giokas added that Binance’s agreement with US authorities “marks the same tipping point we saw earlier at the intersection of the .com era and the post-.com era.”
Binance has pleaded guilty to criminal charges related to money laundering, operating an unauthorized money transfer business, and violating sanctions. CEO Changpeng Zhao resigned after pleading guilty to violating anti-money laundering requirements and agreed to pay a $50 million fine, while retaining majority control of the exchange.
Binance also paid the largest fine ever paid by a crypto company ($4.3 billion to various U.S. government agencies) and worked with an independent compliance watchdog to ensure compliance with the terms of the plea agreement. It is scheduled to run for three years.
The full terms of the agreement with the U.S. have not yet been made public, but John Reed Stark, a legal consultant and former SEC enforcement lawyer, said for Company “And it’s going to be very invasive.”
What we do know is that Binance currently has billions of dollars worth of transactions that facilitated suspicious activity, including $898 million in transactions between US users and sanctioned users based in Iran. This means that it needs to be investigated and reported.
This obligation also requires Binance to fully cooperate in “all matters” related to the agreement or “any other conduct under investigation by the government” during the term of the agreement.
Stark said this is likely to become “increasingly onerous, onerous and difficult” for the company.
New CEO Richard Teng faces considerable challenges in charting a new direction for the company while correcting past legal violations.
According to the report, customers withdrew a net amount of $695 million from Binance in the first 24 hours after the government’s announcement. data Compiled by 21Shares.
While this was significantly higher than Binance’s average daily withdrawal amount, it was far from the highest amount since early 2023.
Dexterity’s Safai said traders see the deal with Binance as “finally turning a corner in the industry” and ending “one of the remaining questions for cryptocurrencies in 2023.”
Looking to the future, he added, “we need to prepare for the pace of growth in cryptocurrencies to be slower and more sustainable.”
David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrencies, and other financial areas.
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