A whopping $4.3 billion fine or will it force Binance to dump and sell coins? The newly appointed CEO boldly claims to have strong revenue and profits.

Binance faces staggering $4.3 billion fine, fueling speculation on potential coin selling. New CEO asserts robust revenue and profitability.

Author: Nancy, LianGuaiNews

With the settlement reached between the US Department of Justice and Binance, the industry is even more optimistic about the approval of the Bitcoin futures ETF and the future trend of the cryptocurrency market. At the same time, the market is also concerned about how Binance will pay the hefty penalty of $4.3 billion? And whether it will have an impact on the market?

As one of the largest corporate settlement agreements in US history, Binance is required to pay over $4.3 billion in criminal forfeiture and fines. The Financial Crimes Enforcement Network (FINCEN) fines amount to $3.4 billion, and the Office of Foreign Assets Control (OFAC) fines amount to $968 million. In addition, Binance founder Changpeng Zhao will also pay a bail of $175 million, making it one of the largest bails in history.

In terms of amount, it can be considered the most expensive penalty in history, enough to make Binance “bleed heavily”. It is worth knowing that Coinbase, another cryptocurrency exchange, had a total net revenue of $3.1 billion in 2022. So how profitable is Binance? As Binance does not disclose information such as revenue, profits, and cash reserves to the public, the outside world cannot accurately know its financial situation. However, we can still get some insights from partial public data.

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The amount of Binance Coin (BNB) burned also reflects Binance’s profits to some extent. According to Binance’s quarterly burn data announced this year, approximately $1.736 billion worth of BNB was burned. If we assume that Binance will use 20% of its profits for buybacks and burning of BNB as it has done in the past, Binance’s profit would be around $8.68 billion. However, due to the change in BNB burn rules to automatic burning, there may be some differences in this data.

However, based on Binance’s revenue in the previous two years, its profits are also considerable. According to data disclosed by Binance founder Changpeng Zhao in an interview with Bloomberg, Binance’s estimated net profit for the whole year of 2020 is $1 billion, with revenue of $5.5 billion, which means the ratio of net profit to revenue in that year was 18.18%. If we extrapolate based on this ratio, Binance’s revenue in 2021 and 2022 would be around $32 billion, with a profit of approximately $5.82 billion.

Based on these estimates, Binance’s profits should be enough to cover the $4.3 billion fine. Moreover, Binance also had substantial revenue in its early years. According to court documents submitted by the US Securities and Exchange Commission (SEC) in June this year, Binance’s revenue from June 2018 to July 2021 was $11.6 billion, with most of it coming from trading fees.

In addition, Conor Grogan, Head of Coinbase, stated in a post on X platform today that according to Binance Corporate’s Proof of Reserves (PoR) data, its cryptocurrency holdings include $6.35 billion in total assets and $3.19 billion in stablecoins, excluding off-chain cash balances or funds not in the PoR wallet. Binance is most likely to fully pay the $4.3 billion Department of Justice fine without selling any cryptocurrency assets.

In response to Conor Grogan, Binance’s new CEO Richard Teng also stated that the fundamentals of Binance’s business are very strong. Binance continues to operate the world’s largest cryptocurrency exchange in terms of trading volume, has no debt in its capital structure, and has moderate expenses. Despite charging low fees to users, Binance has strong revenue and profits.

Overall, although Binance has paid a huge economic price in exploring regulatory compliance, its settlement with US regulatory agencies implies that more trading platforms will move towards standardization in the future, taking an important step towards the sustainable development of the cryptocurrency industry.

Related reading: The era of CZ at Binance is over! Spending $4.3 billion to settle with the US Department of Justice, Richard Teng becomes CEO

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