The world of crypto is controversial as it is and the most controversial institution right now is Binance and its CEO Changpeng Zhao, AKA CZ. The platform’s top executive has agreed to plead guilty to violating US anti-money laundering requirements. The industry’s biggest trading company has agreed to a whopping $4.3 billion fine to settle a long-running investigation with the US Department of Justice (DOJ). CZ will also personality pay a $50 million penalty. The US DOJ accused Binance of skirting sanctions and allowing individuals from sanctioned jurisdictions to transact on its crypto exchange.
What Happened? What did Binance Do?
Binance is the epitome of what crypto is all about. It was operating globally and is not beholden to a central authority – or at least until today. When Satoshi Nakamoto created Bitcoin, he envisioned an asset that could not be controlled by traditional financial institutions, central banks, and regulators. With the same vision, Binance operated sans a head office and for a time seemed outside US regulations – except for the US subsidiary.
From its inception in 2017, it became a very popular crypto exchange. Its founder, CZ was able to steer the company in the right direction, and has now $65 billion worth of assets under management. However, the popularity came at a price. CZ and his company were always under fire and scrutiny. One of the biggest blows was the attack on Binance’s stablecoin BUSD, which led to it being phased out due to regulatory pressures.
According to Reuters news, Binance failed to report more than 100,000 suspicious transactions with entities that the US government tagged as terrorists. This includes Hamas, Al Qaeda, and others. There are also accusations of letting operators of websites involved in child abuse and perpetrators of ransomware attacks transact within the platform.
US Attorney General Merrick Garland said:
“Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges… Binance also did more than just fail to comply with federal law. It pretended to comply.”
Is the Crypto Industry in Danger?
It is hard to answer this question. There are two ways of looking at this.
Yes, this is bad. With the Fall of FTX still fresh in our minds, this news will surely send a shockwave that could start a new round of fear and uncertainty. CZ is known as a stalwart of crypto and his plea deal can be seen as another attack on the foundations of digital assets. It also puts a spotlight on how easy it is for alleged criminals and terror groups to move funds using crypto.
This looks bad, however, we have to look at it objectively. Yes, the crypto exchange might have been used by questionable entities, but this also happens to traditional financial institutions.
Big banks like JP Morgan and HSBC have also been accused of defying money laundering restrictions by moving funds allegedly owned by shadowy individuals. According to a report by the Bank for International Settlement, it is estimated that $500 billion to as much as $1.5 trillion is laundered through banks annually. For context, that is about the market cap of all crypto.
Binance’s settlement could also be good. It puts an end to an investigation that has been hounding the company for quite some time. It also shows that the company does respect regulations and has no intention of defying restrictions. An ending to CZ’s leadership might give the exchange a fresh s start for the exchange. Let us just hope that the details of the agreement do not veer away from the core vision of crypto and that users are protected from the overreach of authorities.
