Changpeng Zhao, co-founder of the world’s largest crypto exchange Binance, pleaded guilty on Tuesday to criminal charges related to violating U.S. anti-money-laundering laws, and stepped down as head of the company.
But over the long-run, another black eye for the crypto industry could end up being positive for Binance, and the crypto markets, according to several market proponents.
The plea deal with federal prosecutors was accompanied with a more than $4.3 billion Binance fine, according to a statement by the U.S. Department of Treasury.
Binance also will be placed under the supervision of a federal monitor who will oversee the company’s exit from the U.S. market, Treasury Secretary Janet Yellen told reporters Tuesday. Zhao will be barred from having any role in the company for three years after a monitor is put in place, prosecutors said.
In a statement, Binance said its compliance efforts were inadequate.
When Binance was first launched, “it did not have compliance controls adequate for the company that it was quickly becoming, and it should have,” the company said Tuesday. “Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way.”
Zhao’s guilty plea comes only a few weeks since FTX founder Sam Bankman-Fried was convicted of taking billions of dollars in customer money from the crypto exchange.
Securities and Exchange Commission Chair Gary Gensler said earlier in November that the crypto industry is “largely non-compliant” with federal securities laws.
Yet, Steven Lubka, a bitcoin bull and a managing director and head of private clients and family offices at Swan Bitcoin, said the new settlement with U.S. authorities was a “victory” for Binance, in some sense.
Binance “has been under fire for a long time,” and the deal would bring to a close the U.S. regulators’ yearslong probe into the crypto exchange, while allowing the company to continue to operate in other areas of the world, Lubka said in a call.
The settlement also looks unlikely to drive significant outflows from Binance, Lubka added. “People that actually use Binance are not going to stop using Binance because of this. In fact, maybe people who stopped using it because they were afraid of these charges, will actually come back and resume using it again,” said Lubka.
Binance Coin fell 6.7% to about $238 on Tuesday, about 65% lower from its all-time high in 2021. Bitcoin
BTCUSD,
fell 2% on Tuesday to $36,790, according to CoinDesk data, leaving the world’s largest cryptocurrency up over 120% year-to-date, but still down 47% from its peak in 2021.
Meanwhile, the agreement with regulators allows Binance to continue operating globally, which “would be a net positive for market liquidity as we approach several potential demand shocks in 2024,” said Mark Connors, head of research at 3iQ.
However, in the short term, it brings uncertainty to Binance and increases selling pressure on cryptocurrencies, noted Devon James, co-executive director and chief technology officer of Web3 Working Group.
“It seems like CZ was a very involved leader, so how the company will fare under new leadership is unclear,” James said in emailed comments.
Richard Teng, Binance’s global head of regional markets, has become the crypto exchange’s chief executive, succeeding Zhao, the company said on Tuesday.
Zhao’s plea deal, in the short term, “will definitely negatively impact BNB token, as CZ was still a representative of the industry,” said Todd Groth, head of index research at CoinDesk Indices.
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