As 2023 unfolds, Binance faces more and more challenges, marked by two massive withdrawal waves, millions of FUD attacks, and CEO Changpeng Zhao's shift as well. Nevertheless, despite the tough year, Binance remains the crypto market leader.
Here is what happened to Binance this time, why Changpeng Zhao stepped down, and what to expect from the company in the future.
Binance’s version of the dogs and the quicksand
The Binance crypto exchange was launched by Chinese entrepreneur Changpeng Zhao in 2017. It took only one year for the company to get noticed by the U.S. Department of Justice (DOJ). The commissioners suspected Binance of violating the anti-money laundering law (AML).
In 2019, Binance revealed its US affiliate company special for serving US customers in accordance with the local laws. Now it turns out that those efforts were useless.
Here is what else US watchdogs have accused Binance of over the past three years:
1. Binance has been illegally providing American citizens with access to forbidden crypto tools. In October 2020, Forbes published an article claiming that Binance had been making money from US investors through shady schemes, giving American citizens access to the main platform's tools, bypassing Binance.US (for example, the main platform, unlike the US affiliate, provides loan service).
2. Binance illegally issued securities as tokens. In February 2023, Binance lost its own stablecoin, Binance USD (BUSD). Paxos, the company that issued the coin, severed its working relationship with the cryptocurrency exchange as the regulators claimed BUSD was illegally issued security. By the way, BNB, the crypto exchange's native token, also violates the securities law.
3. Binance used customers' money for fraud. The U.S. Securities and Exchange Commission (SEC) accused the platform of this in June 2023, indicating that Binance illegally used customer assets to falsify trading volume, aiming to fake demand.
Binance is being blamed not only by the watchdogs but also by the members of the crypto community. Many believe Binance is responsible for the collapse of its biggest rival, FTX, which occurred in November 2022.
FTX was founded by the businessman Sam Bankman-Fried. As of the end of November, he is waiting for a court ruling on a fraud case and might face 165 years in prison.
The chain of steps that caused the FTX collapse was set in motion by Zhao: he announced the sale of FTX tokens and hinted that the platform was in trouble.
On November 21, 2023, Binance settled with four US agencies, including the DOJ, and agreed to withdraw business from the country. One of the clauses in the agreement is the CEO switch. Changpeng Zhao's place has already been taken by Richard Teng, who previously headed the Middle East, North Africa, and Europe regional markets division.
The settlement cost Binance $4.3 billion. A penalty was imposed by the US authorities for violations of American laws.
The fine has become a meme. Changpeng Zhao has a four-point code; the last one urges ignoring FUD. When the road gets rocky, Zhao responds to all claims and messages with "4", referring them to the code point. Amid the penalty news, Zhao's familiar "four" flashed new colours.
Although Zhao pleaded guilty and agreed to pay the fine, he could face jail time.
Binance survival chances
Zhao's resignation and the fine divided the crypto community into two camps: optimists and pessimists. Some of them believe that the worst is already over, while others are pretty sure of Binance's imminent demise and the market's drop to new lows.
Optimists assume that Zhao's agreements with the watchdogs will stop the persecution. They also believe that the conflict resolution over the major crypto exchange with the regulators can support the cryptocurrency market bullrun. Many call Zhao a true hero.
Pessimists see the prerequisites for the Binance collapse. In their opinion, the problems uncovered by the US regulators will not allow the crypto exchange to receive money through grey schemes anymore, and Binance will repeat the FTX's fate.
The conspiracy theory has also come up, speculating that sacrificing Binance is a strategic move in preparation for the launch of the first in the history of the US spot Bitcoin-ETF. Some believe that major market participants, particularly BlackRock, seek to eliminate competitors to dominate the market.
The launch of the spot Bitcoin-ETF has divided the market into pessimists and optimists as well: some are waiting for BTC to skyrocket up to $150k and billions of investments to inflow, while others are afraid of centralisation and a market drop.
So it's time to withdraw money from Binance and look for another crypto exchange?
Binance has survived many crises. Despite years of regulatory pressure, loss of stablecoin, change of head, and other difficulties, the crypto exchange remains the market leader.
Let's hope that this time the optimists are right, and Zhao's sacrifices are enough to save Binance and provide the whole market with fuel for growth.
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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
