Binance News 2

On November 21, 2023, US Treasury Secretary Yanet Yellen announced a settlement in the court proceedings between FinCEN, the US financial regulator, and the crypto exchange Binance. This settlement includes the highest penalty ever imposed in the USA for money laundering. In the following article, CURENTIS explains why this high penalty against Binance is not only bad for the crypto exchange.

"Actually its #Benance" - this is how Janet Yellen began her speech in which she announced new measures by the Treasury Department against money laundering and illegal financing. The slip of the tongue "Benance" instead of "Binance" caused a wave of memes on the platform X (formerly Twitter) by the crypto community.

It was not only the slip of the tongue that brought joy to crypto traders and trading platforms, but also the announcement of the settlement between the US regulatory authority and Binance. This sounds paradoxical at first, as the fine imposed on Binance as part of the settlement is one of the highest fines ever imposed in the US. However, traders and platforms were hoping for "calm" on the market as a result of Binance not being banned from operating in the USA. In fact, the prices of all cryptocurrencies climbed following the announcement of the settlement. The native Binance token (BNB) reacted to the imminent announcement of the settlement with a rise from 242 dollars on November 16 to 253 dollars on November 20.

However, the settlement also involved the departure of the "mastermind of the stock market" Changpeng Zhao. The market reacted negatively to this news. After it was announced that Changpeng Zhao would be leaving the crypto exchange, the price of the Binance token fell to 227 dollars. The price of Bitcoin fell by 2.3% from November 21 to November 22 due to the resignation of Binance's founder.

The forced departure of Changpeng Zhao also led to high withdrawals of the Binance token from the platform. Investors presumably feared for the future of the platform and the token following Zhao's departure. According to the cryptocurrency website DefiLama, Binance customers withdrew around one billion US dollars from the Binance US platform on the day Changpeng Zhao's departure was announced.

The extreme price jumps and associated withdrawals from the Binance platform led to a wave of liquidations on the options market. According to Coinglass, a crypto-derivatives trading website, more than 94,000 traders were forced to close their margin positions in the 24 hours following the announcement of Changpeng Zhai's departure. These traders had hoped for an increase in the price of the Binance token as a result of the settlement.

Amid the problems of the largest crypto exchange, the price of the token of the bankrupt exchange FTX, or FTT for short, rose sharply. Investors are likely expecting a relaunch of the website, which has been repeatedly discussed by business representatives and regulators in the US . The crypto exchange FTX, run by Sam Bankman-Fried, and Binance were long-standing competitors in the crypto market before FTX was forced to close due to Bankman-Fried's fraudulent activities. The FTT token continues to exist and experienced an increase of more than 15% after the departure of Changpeng Zhao.

To understand why Binance has such major problems with the implementation of regulatory requirements, we need to take a look at Binance's past.
In 2017, Changpeng Zhao founded Binance in China. Highly respected in the cryptocurrency scene, Zhao managed to catapult Binance to the top of the crypto exchanges within six months through improvements and innovations he introduced in his company. One of Binance's key strategies was to internationalize its business as early as possible. However, the company also encountered major regulatory challenges as a result of this rapid growth.

Binance was originally headquartered in China. Shortly after Binance was founded, the Chinese government banned the exchange of cryptocurrencies in local currency, as the Chinese government feared that the purchasing power of the Chinese currency could fall as a result of conversion into cryptocurrencies.
Binance then moved to Japan. However, the Japanese government warned local investors early on against doing business with Binance, which did not yet have a license to trade cryptocurrencies in Japan at the time of the move. After this incident, Binance no longer announced its official headquarters. Changpeng Zhao said in 2019: "Binance has no bank account, no office and we are moving away from the corporate concept. We are just an organization or a community working together." A statement that made regulators around the world prick up their ears.

Thanks to the concept of no fixed headquarters and a high degree of internationalization, Binance was able to provide customers from all over the world with crypto services.
However, the processes became increasingly difficult due to the attention of regulatory authorities. The US SEC in particular had its eye on Binance, and for good reason: when the SEC began its investigation in 2019, a fifth of Binance's customers were based in the US.

In order to comply with US regulations, the company launched Binance US. This company officially operated independently from the original company and Changpeng Zhao and was only responsible for the US. In reality, the company facilitated access to the main platform outside the US to settle trades and bring US money to the main exchange. In 2023, the SEC finalized its investigation of Binance US and Binance. The SEC filed a complaint against Binance and Changpeng Zhao for money laundering and financing illegal enterprises. The charges included allegations that Binance was still involved in Binance US behind the scenes and was conducting the business of the US subsidiary. The evidence presented by the SEC in cooperation with FinCEN was so severe that Binance accepted the large penalty in settlement. CURENTIS published an article on this unprecedented penalty against Binance on December 28, 2023.

Despite the large fine, the news of the settlement of the US claims is a positive boost for the crypto market. A healthy and calm cryptocurrency market is better for all traders than a turbulent market with uncertainty due to possible penalties and investigations against crypto exchanges. Provided that no further investigations and money laundering offenses against crypto exchanges come to light, the crypto market will quickly recover from the price falls surrounding the departure of Changpeng Zhao.

Binance will also recover quickly from the fine. This is supported by the daily settlement of trades amounting to 70 billion dollars as opposed to a fine of 4 billion dollars. It is a positive sign for the crypto market that Binance is allowed to continue its business in the USA.

However, the settlement and the high fine sends a clear signal to all crypto exchanges. The compliance requirements for global crypto exchanges will increase and the use of cryptocurrencies to circumvent sanctions will become much more difficult. Large platforms will look back at the situation with Binance and try to avoid such miscalculations. Users can expect stricter KYC (Know Your Customer) and AML (Anti-Money Laundering) guidelines. However, it remains to be seen whether all exchanges will adhere to them without exception.