Behind the $4.3 billion sky-high fine, is the sanction on Binance and CZ good news or bad news?

Is the $4.3 billion fine and sanctions on Binance and CZ a Positive or Negative Development?

Author: Phyrex, Binance Square creator Source: X (original Twitter) @Phyrex_Ni

Over 10,000 BTC, nearly 100,000 ETH, 400 million USDT, 150 million USDC, and $2.2 billion worth of ALTs. These are the five data points of assets withdrawn from Binance in the past 24 hours. Although Binance still holds over $67 billion in assets, the withdrawal trend has not ended. Assets continue to flow out of Binance almost every minute. While the whole network is bidding farewell to CZ, Bloomberg’s front page headline is split between Hamas and CZ/Binance. If we go back in time, I wonder how many of you remember that in October, I emphasized the ongoing scrutiny of cryptocurrencies as a means of terrorist financing by the House Financial Services Committee. Just last week, 57 members of Congress collectively requested Biden and Yellen to provide detailed support for cryptocurrencies against terrorist activities on the 27th of this month.

Now coming back to the present, of the $4.3 billion hefty fine, $3.4 billion goes to the Financial Crimes Enforcement Network (FinCEN) and $960 million goes to the Office of Foreign Assets Control (OFAC). Out of the $3.4 billion paid to FinCEN, $2.7 billion is to be paid to the Commodity Futures Trading Commission (CFTC), of which $1.35 billion is from trading fees collected from U.S. customers, and the other $1.35 billion is a fine. Furthermore, CZ himself will receive a deferred fine of $150 million. This suggests that Binance’s biggest issue was allowing U.S. customers to participate in trading, as the fines for this part were the highest.

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In fact, the answer from the Department of Commerce, which is the highest institution conducting the investigation into Binance, is that Binance neither allowed Americans to trade nor violated securities laws. These matters fall under the purview of the SEC. By the way, this settlement represents the conclusion of a multi-year investigation between Binance and the Treasury Department, Justice Department, and the Commodity Futures Trading Commission (CFTC). However, it does not include the Securities and Exchange Commission (SEC), but we’ll discuss that later. Instead, Binance violated U.S. anti-money laundering (AML) and sanction laws that protect American national security and the integrity of the international financial system. In plain language, Binance did not strictly control the composition of traders on the platform, which allowed designated terrorists, including Hamas, to exploit the platform. This is something the United States cannot tolerate the most, apart from financial issues.

So in this report, whether it’s the Ministry of Commerce or the Ministry of Justice, the definition of Binance is that they did not execute AML properly. Even in the actual lawsuit by the Commodity Futures Trading Commission (CFTC), it provided records of Binance staff chatting about “Hamas being able to buy an AK47 for less than $600” – that’s what gives Binance the most headache. Violating AML and providing funds to terrorism are two completely different things. Luckily, this time Janet Yellen’s direct answer is that Binance only failed to strictly implement AML. And CZ also admitted to the accusations of money laundering and violating US sanctions. This means that Binance has managed to avoid the biggest crisis. Starting today, the only problem Binance, including Binance US, faces is only about money, and money is the least of Binance’s worries.

According to the plea agreement, CZ’s maximum sentence of 10 years in prison will be reduced to no more than 18 months. Currently, CZ has given up on the appeal, and the sentencing will be postponed for 6 months. After paying a $175 million bail, CZ was released and can travel between the UAE and the US freely. This treatment was also experienced by Arthur Hayes, the co-founder and former CEO of BitMEX. At that time, Arthur Hayes received a sentence of 6 months of house arrest and 2 years of probation. From this perspective, CZ will probably also be under house arrest. But this is not the main point. The main point is that Arthur Hayes, who stepped down as CEO, is still a co-founder of BitMEX and can “jointly” handle BitMEX matters as an advisor.

Speaking of which, clever folks may have already figured it out. Indeed, CZ is no longer the CEO and his self-statement suggests he will take a break for a while. However, this does not mean CZ is distancing himself from Binance. Although CZ is no longer the CEO, “He Yi, the co-founder of Binance, in this case, was not implicated in any way.” I don’t need to say much about her relationship with CZ. So has Binance changed? No, CZ’s role is more of a decision maker rather than an executor. Whether he is the CEO or not is not important. The CEO is just working for the board of directors. And this case did not deprive CZ of his position on the board of directors. The US did not handle Binance US in the same way it handled TikTok. CZ can continue to speak for Binance on Twitter.

From the perspective of phased conclusions, the US gave Binance a reason it cannot ignore to make the final decision: “Either you follow my rules and play within the framework of my rules, or you stop playing anywhere.” That’s why I emphasized earlier that Binance only violated AML, not provided support to terrorists. These two decisions are actually just a thought away. If you comply, it’s the former. If you don’t obey, it’s the latter. Choosing the former is not the goal of the fine. Does the US lack $4.3 billion? What the US lacks is control over the world’s largest cryptocurrency exchange behind this $4.3 billion. Yellen’s words are the best definition: “The result of these agreements will be to end the company’s behavior that poses risks to the US financial system, US citizens, and US national security.”

Binance has been released from the blacklist of companies that pose a threat to the United States. This not only means that Binance still has the opportunity to operate BinanceUS, but also that channels, including payments, in the United States and Europe can once again serve Binance. These are the most important things for Binance. I have mentioned multiple times before that compliance is necessary for all exchanges to progress. Binance, which has been under the scrutiny of multiple US departments, has had to give up many markets. But starting today, these previously abandoned markets and opportunities have the possibility of restarting. The payment is only a quarter of the profit and the nominal resignation of CZ from the position of CEO, so has Binance changed? Indeed, it has. With the removal of the biggest constraint, Binance’s imagination will be even better.

After resolving the SEC’s issue, BinanceUS will be more favored by Wall Street, and the path to going public will be closer. Speaking of the SEC, it is necessary to mention that the SEC filed a lawsuit against Kraken yesterday, and the reasons for the lawsuit are almost identical to Coinbase’s. As we mentioned earlier, the settlement in the United States does not include the SEC, which means that the SEC’s regulatory issues with Binance are not a matter of “political stance.” Even with the settlement with the CFTC, Binance has already paid fines and forfeitures for allowing US customers to trade. Therefore, it is highly likely that the SEC will not continue to dwell on this issue. So, the remaining goal of the SEC is likely to pave the way for the compliance of cryptocurrencies, and a milestone in this path may be a spot ETF for Bitcoin and Ethereum.

Of course, for Binance, which has rid itself of the biggest constraint, the issue with the SEC does not involve criminal matters, and it should even be said that there are no lawsuits between Binance and the SEC. The lawsuits are for BinanceUS and CZ personally. So, the outcome is either to tough it out like Coinbase and Kraken, or to settle, both of which are only money matters. From my personal understanding, the latter is more likely, after all, Coinbase is a listed company in the United States, and Kraken is a compliant exchange in both Europe and America. BinanceUS, essentially, is an important layout by Binance to go public in the United States and bind Wall Street funds. The biggest problem between BinanceUS and the SEC is Binance itself and CZ personally, and now that the former is in the clear, the latter has also admitted guilt.

So, as long as BinanceUS chooses to settle with the SEC, the path to going public for BinanceUS will be smooth. Of course, the most crucial aspect in this is the settlement conditions between BinanceUS and the SEC. Therefore, when we look at this issue from a god’s-eye view, we can see that it is a win-win situation overall. The United States has removed an uncontrolled financial risk, and Binance has eliminated the long-arm jurisdiction of the United States and the associated damages. The so-called astronomical fines are the first step towards Binance’s “compliance certification,” and as for CZ, he has only taken off an unimportant title but has gained the “identity” to freely enter and exit the United States. It also means that both Binance and CZ can participate in US politics and the economy in the sunlight. What I want to know most now is whether it will be the Democratic Party or the Republican Party. It must be one of them.

Adults in the world consider more about interests, whether it’s national interests, corporate interests, or personal interests. Whether or not Binance is really one of the financing channels for Hamas, that’s not the most important thing. The most important thing is that once this label is put on, Binance will no longer be playing the “cat and mouse” game solely based on economic interests. It will escalate to a matter of national security, and this is not something that can be resolved with money. What we see, what is disclosed, is a “$4.3 billion transaction,” but beneath it, Binance and CZ are fighting for their lives. And the result is that Binance and CZ have paid the “least valuable” price to complete the transformation in their identities. The instant surge and fall of Coinbase’s stock price last night is the best proof.

This incident of Binance not only did not elevate Coinbase’s market value and market potential, but it made the market realize that after breaking free from the shackles, Binance permanently gained the qualification to challenge Coinbase in the United States. This matter is both a means of navigating through the crypto industry and a positive development. At least in the foreseeable two to three cycles, as long as Binance doesn’t shoot itself in the foot, it will continue to prosper. In fact, FTX and Sam have already provided the best process. FTX’s main site can develop wildly, as long as it operates within the framework and supervision of the United States. As for FTXUS, it is the domestic “money-sucking” weapon. Compliance, binding with Wall Street, and going public will lead BinanceUS to a broad avenue of development.

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