Where crypto goes next after Binance gets humbled

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    Binance’s $4.3 billion settlement with U.S. authorities this week brings new complications to the world’s largest cryptocurrency exchange. However, crypto enthusiasts breathed a sigh of relief, saying the deal removed much of the uncertainty looming over the industry.

    “It’s great to wake up in crypto and not have to worry about what’s going to happen to Binance,” said Matt Hogan, chief investment officer at crypto asset management firm Bitwise, formerly known as Twitter. I spoke at X, who was there. “2024-2025 is going to be great.”

    JPMorgan Chase analysts said in a note that the settlement “eliminates the potential systemic risk arising from a hypothetical Binance failure.”

    Michael Safai, a partner at crypto trading firm Dexterity Capital, argued that Binance’s “resolution signals a path forward for cryptocurrencies and confidence that this asset class will not disappear.”

    The movement of cryptocurrencies and related stocks after Binance’s announcement showed that investors generally share that optimism.

    Binance’s own crypto token BNB (BNB-USD), which fell 13% in the hours after the settlement announcement, is one example of how much remains to be done now that it is under intense government scrutiny, but later on Wednesday, other Currency prices also fell. The improvement is steady.

    Bitcoin (BTC-USD), the world’s largest cryptocurrency, rose 1% in the 24 hours after Binance’s announcement, while Ether (ETH-USD), the second largest digital currency, rose more than 4%.

    Shares of Coinbase (COIN), another major cryptocurrency exchange, also rose more than 3% on Wednesday on hopes that the company could benefit from Binance’s problems.

    bull case

    The bullish case for cryptocurrencies is that its worst problems are now in the rearview mirror.

    Bitcoin reached an all-time high of $68,789 in November 2021, but it has fallen into 2022 as the Federal Reserve began raising interest rates and a series of companies, including cryptocurrency exchange FTX, filed for bankruptcy in November 2022. It plummeted to .

    This was followed by a widespread crackdown on the cryptocurrency industry. Regulators have filed charges against several major companies, including Coinbase and Binance. Earlier this month, a jury found FTX founder Sam Bankman Fried guilty of defrauding customers, lenders and investors.

    In this courtroom sketch, FTX founder Sam Bankman Freed stands as jury foreman reading the verdict in a fraud trial that ended on November 2nd. (Jane Rosenberg/Reuters) (Jane Rosenberg/Reuters)

    Now, investors have renewed optimism that the industry is ready for broader acceptance and regulatory clarity from Washington. They are hopeful that the Securities and Exchange Commission may soon grant approval for a Spot Bitcoin ETF, allowing investors to gain exposure to the cryptocurrency without owning Bitcoin. There is.

    BlackRock (BLK) is one large asset management company that recently filed to launch such a product. Grayscale Investments has asked the SEC to approve converting its Bitcoin Trust into a spot Bitcoin exchange-traded fund following an August ruling by three judges on the District of Columbia Court of Appeals. It’s putting pressure on you.

    The panel concluded that the SEC was “arbitrary and capricious” in denying Grayscale’s conversion application in 2022.

    The next official milestone by which the SEC must approve or deny approval of a spot Bitcoin ETF is January 10th, but the SEC could approve the application sooner.

    ‘The end of an era’

    But there are several reasons for investors to remain cautious. SEC is in litigation against some of the industry’s biggest companies, including Binance and Coinbase, as it seeks to force more players to register with regulators and classify digital assets as securities. is still facing a series of lawsuits. I will try.

    And the fact that Binance now has to deal with extremely intense government scrutiny will undoubtedly hinder the industry’s largest crypto exchange.

    WASHINGTON, DC - NOVEMBER 21: U.S. Attorney General Merrick Garland speaks during a press conference at the U.S. Department of Justice Building on November 21, 2023 in Washington, DC. Garland held a press conference to announce new crypto enforcement actions against Binance, which is accused of money laundering in the United States.  (Photo by Anna Moneymaker/Getty Images)

    Attorney General Merrick Garland announced the settlement with Binance at a press conference on Tuesday. (Anna Moneymaker/Getty Images) (Anna Moneymaker via Getty Images)

    “This is the end of an era,” said Yanis Giokas, senior director of digital assets at Moody’s Analytics. “As digital currencies become more mainstream and institutional investors enter the space, regulation and enforcement will become more stringent to ensure compliance and consumer protection.”

    Binance’s agreement with U.S. authorities “marks the same tipping point we saw earlier at the intersection of the dot-com and post-dot-com eras,” Giokas said.

    Binance has pleaded guilty to criminal charges related to money laundering, operating an unauthorized money transfer business, and violating sanctions. CEO Changpeng Zhao resigned after pleading guilty to violating anti-money laundering requirements and agreed to pay a $50 million fine, while retaining majority control of the exchange.

    SEATTLE, WA – NOVEMBER 21: Binance CEO Changpeng Chao walks out of the U.S. District Court in Seattle, Washington on November 21, 2023. Mr. Zhao pleaded guilty to money laundering charges.  (Photo by David Ryder/Getty Images)SEATTLE, WA – NOVEMBER 21: Binance CEO Changpeng Chao walks out of the U.S. District Court in Seattle, Washington on November 21, 2023. Mr. Zhao pleaded guilty to money laundering charges.  (Photo by David Ryder/Getty Images)

    Former Binance CEO Changpeng Zhao will appear in U.S. District Court in Seattle on November 21st. (David Ryder/Getty Images) (David Ryder via Getty Images)

    In addition to paying a $4.3 billion fine, the largest ever for a cryptocurrency company, to various U.S. government agencies, Binance has hired three independent compliance monitors to ensure it meets the terms of its plea agreement. We plan to accompany him for a year. Will work.

    The full terms of the deal with the U.S. have not yet been disclosed, but they are “potentially harsh, strong and very aggressive,” said general counsel and former SEC enforcement attorney John Reed Stark. He told Mr. X, formerly of Twitter. But said.

    Binance is currently required to investigate and report billions of dollars in transactions as suspicious activity, including $898 million in transactions between US users and sanctioned users based in Iran. It is known.

    This obligation also includes Binance’s full cooperation in “all matters” related to the agreement or “any other conduct under investigation by the government” during the term of the agreement.

    Richard Teng, head of Middle East and North Africa at crypto company Binance, gestures during an interview with Reuters in Dubai, United Arab Emirates, March 30, 2022. The photo was taken on March 30, 2022.Reuters/Abdel Hadi RamahiRichard Teng, head of Middle East and North Africa at crypto company Binance, gestures during an interview with Reuters in Dubai, United Arab Emirates, March 30, 2022. The photo was taken on March 30, 2022.Reuters/Abdel Hadi Ramahi

    Richard Teng will be the new CEO of Binance. (Abdel Hadi Ramahi/Reuters) (Abdel Hadi Ramahi/Reuters)

    Stark said this is likely to become “increasingly onerous, cumbersome and challenging” for the company.

    New CEO Richard Teng faces similar challenges in correcting past legal violations and charting a new direction for the company.

    In the first 24 hours after the government’s announcement, customers withdrew a net $695 million from Binance, according to data compiled by 21Shares.

    While this is significantly higher than Binance’s average daily withdrawal amount, it is far from the highest withdrawal amount since early 2023.

    Dexterity’s Safai said traders see the Binance deal as “finally turning a corner in the industry” and “putting an end to one of the remaining questions for cryptocurrencies in 2023.” .

    Looking to the future, he said, “we need to prepare for the pace of growth in cryptocurrencies to be slower and more sustainable.”

    David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrencies, and other financial areas.

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