There’s no doubt that 2023 was a tough year for Binance. Since the beginning of that year, it faced numerous regulatory challenges that forced it out of countries like the Netherlands, Russia, and many more. Binance has also been at loggerheads with the U.S. Commodity Futures Trading Commission (CFTC) and Securities Exchange Commission (SEC). Don’t forget that while the CFTC oversees the commodities and derivatives markets, the SEC conducts oversights on all products that are considered to be securities in the United States.
Meanwhile, there has been an enduring controversy and debate over the true status of crypto. The SEC, headed by an anti-crypto individual, Gary Gensler insists cryptocurrencies are securities and must be under its purview. Therefore, it sued prominent crypto firms, including Binance, Ripple, Coinbase, and more for offering crypto products without its approval.
Although the U.S. has yet to devise any concrete regulatory framework for cryptocurrencies, regulators believe the existing financial laws in the country have covered that. Around July, the SEC suffered its first setback after a U.S. ruled against the recognition of XRP as a security, putting a logical end to the agelong legal battle.
Binance vs CFTC
Meanwhile, the CFTC got into action in March after filing a lawsuit against Binance. In the legal document, the regulator accused the former CEO of Binance, Changpeng Zhao of running an illegal exchange. More so, it alleged that Zhao alongside other executives ran a “sham” compliance program with Binance and supervised the willful evasion of the U.S. laws by the exchange. Zhao was alleged to have told employees and users of the exchange to evade all the compliance measures instituted to prevent money laundering and other financial criminalities.
In November, he pleaded guilty to the charges and consequently resigned from his active role in the exchange. As part of the settlements, Binance and Zhao are expected to pay $2.7 billion and $150 million respectively to the CFTC.
The implication of Binance’s settlement with the CFTC
The implication of Binance’s settlement with the Commodity Futures and Trading Commission (CFTC) on the crypto industry is indeed a positive one. First, the impact will not only affect the industry positively alone as Binance also stands a great chance of benefiting from it. First, the settlement would shut down every speculated meltdown of the crypto market if Binance had crumbled as a result of the legal tussle.
As the world’s largest cryptocurrency exchange by trading volume, Binance over the years has matured into a prominent player in the industry. Presently, a significant portion of crypto businesses directly or indirectly have exposure to the exchange. Therefore, the blasting radius of Binance’s struggles could have been deadly or be the end of the industry if the exchange had failed to reach a level ground with the regulator.
An example of this could-have-been scenario is the insolvency crisis that rocked the crypto market due to FTX’s collapse. Then, the now-defunct FTX was the second-largest crypto exchange by trading volume. A significant amount of investment went down with exchange ushering in a difficult phase for the crypto market. Consequently, the settlement with CFTC to an extent, has swayed Binance from a path of uncertainty and struggles.
Similarly, the settlement will help attract investors from the traditional finance sector to the crypto industry. CFTC’s tussle with Binance represents a shift to regulating crypto businesses in the United States. The settlement alongside more regulation will give investors assurance about the safety of their crypto-related investment. Now, TradFi giants have the blueprint for making their next move into the crypto industry.
Conclusion
Before the settlement, Binance lost a sizable portion of its market share. Most investors and traders at some point began to doubt the existence of the exchange in the long run. Furthermore, they began reducing their patronage to reduce their exposure in case of any meltdown.
On the flip side, the settlement is a strong pointer that the exchange is definitely going nowhere. Also, the settlement with the CFTC will offer a new chapter for the United States crypto landscape. More so, the concession could be the driver of the long-awaited crypto regulation in the United States.