On November 21, Changpeng “CZ” Zhao stepped down as Binance CEO in a plea deal with the United States Department of Justice.
The US officials accused Binance, the world’s largest crypto exchange, of violating anti-money laundering requirements and causing illicit transactions with stolen funds. They claimed the platform lacked safeguards for US citizens, allowing criminals to move funds without passing the obligated know-your-customer procedure.
As per the plea deal, CZ is not allowed to hold any executive positions in Binance. Additionally, the exchange should cover a $4.3 billion settlement with the United States Department of Justice. However, CZ retained the majority stake in Binance and didn’t end up in jail like Sam Bankman-Fried, the former FTX CEO.
While the FTX crash in 2022 caused a long-running crypto winter and crypto users’ scepticism towards centralized crypto exchanges and custodial solutions, the Binance case even strengthened BTC positions and reflected in greed sentiments. Despite expected mass withdrawals, Binance Bitcoin’s reserve decreased by only 17% from its all-time high compared to FTX’s 99.9%. Such an outcome made traders more bullish, predicting significant inflows in Bitcoin following the approval of a spot BTC exchange-traded fund.
After the happy ending for the crypto traders and Binance, the CZ’s resignation indicates the beginning of a new era for the exchange itself and the entire market.
CZ contributed to the crypto market innovations and adoption, building the world’s largest crypto exchange and allowing easy access to cryptocurrencies worldwide. CZ is definitely one of the most loud names in the market, representing some sort of a god for someone. The Binance brand was built around its founder’s personality, similar to how Apple relied on Steve Jobs’ figure. Now the platform will be led by its head of regional markets, Richard Teng. Teng announced on his X (former Twitter) that Binance’s core values remained unchanged and that he would be participating in interviews, events, and AMAs in the CEO position.
The Binance case is a warning for crypto entrepreneurs that the US government won’t allow them to violate regulations and move funds without its permission, and every entity should comply with requirements. The spirit of financial freedom in the crypto market is more and more tightened by rules, causing crypto users to turn to decentralized platforms. On the other hand, centralized platforms are forced to invest in compliance procedures and develop security measures, driving an increase in costs. The high entry barriers for new centralized crypto businesses keep the market from innovations, fast growth and diversity.
The US Presidential Election 2024 will determine the shape of crypto regulations. It is unlikely that pro-crypto candidates such as Ron DeSantis, Robert F Kennedy Jr., and Vivek Ramaswamy will receive enough votes. Meanwhile, leading candidates Joe Biden and Donald Trump negatively approach cryptocurrencies. Biden considers cryptocurrencies the primary cause of the tax gap, and Trump views them as a scam.
The US crypto businesses should be prepared for tough times and avoid angering Uncle Sam while addressing crypto users’ demands.