Will Binance’s legal troubles pave the way for a new era in cryptocurrency?

Rick Steves

“This is just the latest installment in the welcome demise of the unregulated cryptocurrency market. Cases like those surrounding FTX and Binance have come to symbolize the downfall of the ‘crypto bro’ persona – as these high-profile figures are officially moved from cowboy to outright criminal.”

Binance

The trading industry is still digesting the brutal +$4 billion settlement that Binance secured with the US authorities and chief executive CZ’s departure from the role.

What will happen to Binance and the digital asset industry going forward, as well as what will this mean for the next crypto exchanges facing legal issues in the United States, such as Kraken?

We have gathered a number of expert comments from top names within the crypto and traditional finance, including Quant, Zodia Custody, Moody’s Analytics, deVere Group, AltTab Capital, and ETC Group.

“The welcome demise of the unregulated cryptocurrency market”

Andrew Carrier, part of the executive leadership team at Quant, comments:

“This is just the latest installment in the welcome demise of the unregulated cryptocurrency market. Cases like those surrounding FTX and Binance have come to symbolize the downfall of the ‘crypto bro’ persona – as these high-profile figures are officially moved from cowboy to outright criminal. The good news is that much of the world now has regulations in place to tackle fraud and ineptitude in decentralized finance (DeFi). DeFi, and its underlying blockchain technology, does have a future, but it will mature and professionalize to the point it is culturally unrecognizable.

“As the poorly designed elements of the crypto world are forced to either grow up or disappear, hopefully more people will turn their attention to the real gold here. That’s not crypto but the technology behind it: blockchain. With it, we can provide the world’s economies with a genuinely more valuable form of money: digital currencies that are regulated, backed by fiat deposits, and come with useful features like the ability to automate various types of transactions.”

“Account holders should not be paying for the mistakes of exchanges”

Julian Sawyer, CEO of Zodia Custody, stated:

“The past 24 hours have seen US regulators send shockwaves through our industry; firstly with the resignation of Binance’s CEO, and now with the SEC applying pressure on Kraken. If there’s one thing to take away from this, it’s that no firm is ever too big to prioritize proper governance, compliance, and transparency. These three things are crucial for the health of a responsible financial industry.”

“Despite recent regulatory progress, it’s concerning to see that even after the turbulence of last year, fundamental risk management is not as commonplace as it should be — including proper, segregated custody. Account holders, whether retail or institutional, should not be paying for the mistakes of exchanges. Let this be the last time they do so, and let us, as an industry, get back on track to building the robust infrastructure customers deserve.”

“The nature of crypto transactions is that they are traceable and transparent”

Yiannis Giokas, Senior Director – Digital Assets, Moody’s Analytics, said:

“The settlement agreement between US Authorities and Binance marks the end of an era. With digital currencies becoming more mainstream and institutional players entering the space, regulations, and enforcement will become stricter to ensure compliance and consumer protection. Yesterday’s development marks the same inflection point that we saw earlier at the intersection of the .com and post-.com eras.”

Rajeev Bamra, SVP & Head – DeFi & Digital Assets Strategy, Moody’s Investors Service (the rating agency), said:

“To enhance transparency, Binance must prioritize and comply with stringent KYC procedures on both ends of the value chain within respective jurisdictions. This measure ensures the validation of participants, strict adherence to AML protocols, and prevention of potential instances of tax evasion. By implementing these measures, Binance can provide investors with a clearer understanding of the exchange’s value, performance, and risk profile, as would be reflected in the audited financial statements.”

Keith Berry, General Manager, Financial Crime and Compliance at Moody’s Analytics, said:

“The rapidly growing yet relatively nascent crypto market has increasingly been targeted and implicated in financial crime due to its borderless nature, which creates the perception that it can be used to obfuscate illicit activities. However, the nature of crypto transactions is that they are traceable and transparent, due in part to the blockchain. Following the money should mean crime can be tackled successfully. And many crypto companies choose to operate with high standards of due diligence and know your customer checks. It’s a commitment to KYC, along with ongoing regulation and continuous automated compliance checks that are vital for companies when it comes to identifying true beneficial ownership and preventing money laundering.”

“This scandal is going to trigger some short-term volatility”

Nigel Green, Founder and CEO of deVere Group, commented: 

“CZ until now has been the most influential and powerful person in crypto. As such, this scandal is going to trigger some short-term volatility in the market as investors digest the news. However, the crypto market will thrive as institutional money is pouring in and we expect it to continue to do so.”

“BlackRock, the $9trillion asset manager, alongside WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets, have published Bitcoin ETF applications waiting to be approved by the US Securities and Exchange Commission, the SEC.

“We believe that Bitcoin ETFs are an imminent inevitability, and this would help drive crypto prices and mass adoption. Should SEC approval happen, it would be a landmark moment for Bitcoin. The approval by the financial regulator of the world’s largest economy of this spot ETF would show that Bitcoin is, without any question, part of the global mainstream financial system.”

“Binance can thrive even more under new leadership”

Greg Moritz, COO at crypto hedge fund AltTab Capital, added:

“CZ stepping down from Binance is a strong signal of the maturity of the crypto market, where, in contrast to the wild-west stereotype, those who operate outside certain parameters will now be held accountable. Even more importantly, a succession at Binance would show that the largest crypto operations have a solid continuity plan and are not dependent on any one person. CZ may have been the person to grow Binance to the behemoth that it is, but Binance can thrive even more under new leadership.”

“Binance can swallow these penalties”

Tim Bevan, CEO at crypto ETP provider ETC Group, commented: 

“It’s positive to see the US DoJ working with Binance to close this out and thereby avoid a Binance collapse. Market reaction (BNB coin, withdrawals from Binance) suggests so far that Binance can swallow these penalties. If they can absorb any fine, this draws a line under what has hitherto been the biggest single risk in the crypto ecosystem, which is the current liquidity concentration on Binance, regardless of the longer-term outlook for this platform. All eyes will now be on US regulators the SEC and CFTC to see if their stances on the need for oversight of Binance and other crypto market infrastructure providers change in the light of this week’s ruling.”

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