Binance and its mysterious creator, Changpeng Zhao (CZ), are surrounded by clouds of doubt, leaving many to question if this crypto juggernaut will survive the coming storm.
The U.S. Commodity Futures Trading Commission (CFTC) has filed a complaint against Binance and CZ, alleging that they are marketing unregistered crypto derivatives products and skirting American rules.
The issue on everyone’s mind is: Can Binance and CZ survive this turbulent moment amid claims of market manipulation and trading malpractices?
The CFTC is suing Binance on claims that it provided trading for cryptocurrencies it considers to be commodities, including BTC, ETH, LTC, USDT, and BUSD.
Additionally, it is alleged that the exchange instructed staff to utilize VPNs to impersonate their locations and bypass compliance measures. In response to the announcement, Bitcoin’s price fell by roughly 3%, while BNB, the native cryptocurrency of Binance, fell by as much as 6%.
Controversy is nothing new for Binance
Prior to filing the complaint, the exchange had to reverse its no-fee trading campaign for 13 BTC spot trading pairs, which resulted in a temporary halt to trade and a loss of market share.
Due to this choice, the market share has decreased by half and is currently below 30%.
The most liquid cryptocurrency market, BTC-USDT, had a 90% drop in trading volume.
Spreads for the trading pair BTC-USDT have decreased dramatically since trading fees were introduced, and they are presently lying at 0.004bps.
Since last week, Binance’s share of the worldwide market has fallen by 10%, possibly indicating a loss of investor and trader trust.
In a recent blog post, CZ refuted the CFTC’s accusations and stated that Binance « does not trade for profit or’manipulate’ the market under any circumstances. »
He continued by saying that Binance has worked with the CFTC for more than two years and is unhappy at the regulator’s conduct.
The CFTC has questioned Binance’s convoluted organizational structure because it thinks it’s intended to conceal the company’s ownership, control, and location.
The complaint claims that Binance.US was developed to conceal the exchange’s real scope and workings.
To Disguise Exchange Operations, Binance.US Was Founded
One must think about the potential consequences of this case while the cryptocurrency community waits with baited breath.
Binance may be subject to harsh punishments, including as civil monetary fines, trading and registration restrictions, and disgorgement, if it is unable to properly defend itself.
And to make matters worse for Binance, more U.S. agencies may do the same and start their own inquiries.
Binance and CZ have demonstrated resiliency in the face of hardship in the past, despite the seemingly insurmountable difficulties.
The exchange could survive this storm since it has a sizable user base and a reputation for innovation.
With relation to the US market in particular, it will probably necessitate considerable modifications to its business processes and compliance initiatives.
Binance needs to adapt and change as regulatory scrutiny increases in order to keep up with the demands of a more complicated and tightly regulated business.
As a result, it could be necessary to strengthen its compliance infrastructure, form alliances with reputable financial institutions, or even exit particular markets or products.
The final result of the CFTC action will definitely establish a precedent for the larger cryptocurrency ecosystem, and Binance and CZ’s existence may well depend on their capacity to negotiate these new seas.
The market may yet come out of this crisis with greater resilience and strength than ever if they are able to satisfactorily allay the regulators’ worries and show a renewed dedication to openness and compliance.
