Binance: here are statements from CZ and the crypto exchange

Yesterday, several negative reports came out regarding the world’s leading crypto exchange, Binance, and its co-founder and CEO Changpeng CZ Zhao. 

Although these were still only unconfirmed reports, the sources were authoritative, so much so that few dared to doubt. 

However, today we also have official confirmations, and in particular interesting statements from CZ himself and Binance.

Statements from CZ, former CEO of crypto exchange Binance

CZ wrote that he resigned as CEO because he made mistakes and must take responsibility for them. 

What he did not say, however, is that it was probably not his choice, but was a decision forced by the agreement with the Department of Justice, which effectively banned him from holding operational roles in Binance. 

In addition, it turned out that he had to post a $175 million bail in order to be released by the authorities, otherwise he would have been jailed.

It also turned out that he was allowed to go live in the United Arab Emirates (possibly Dubai) pending his court hearing, which will be held on February 23, 2024. He reportedly faces 18 months in prison. 

The fact is that he has pleaded guilty to the crime of failing to comply with anti-money laundering regulations, so much so that it is suspected that Binance’s crypto exchange was also used by terrorist organizations such as Hamas to raise funds undisturbed. 

CZ has also stated that he no longer wants to be CEO of any company, and will now limit himself to being a passive investor. 

The new CEO

CZ also announced that the new CEO of Binance will be Richard Teng, current Global Head of Regional Markets. 

Teng previously also served as CEO of the Financial Services Regulatory Authority at the Abu Dhabi Global Market (ADGM), as well as Director of Regulation at the Singapore Stock Exchange (SGX) and Director of Corporate Finance at the Monetary Authority of Singapore.

This is a real breakthrough within the crypto exchange. Indeed, until now it had always given little importance to regulatory issues, whereas with Teng this may become a priority. 

On the other hand, Binance’s very survival now depends on it, since if more similar problems pop up the exchange could risk closure. 

While the conclusion of the problems with the U.S. justice system now seems to be a done deal for Binance, there may still be similar problems going on in other parts of the world (e.g., Europe) that have not yet reached a conclusion. 

CZ and crypto exchange Binance’s statements

Binance published a post on its official blog with full details of the settlement with the U.S. Department of Justice. 

The lengthy post acknowledges the company’s responsibilities for historical and criminal compliance violations, but the agreement at least allows them to turn the page. 

They write: 

“With the compliance and governance enhancements enshrined in our commitments, we can begin to share our vision for Binance’s exciting future and the future of the crypto industry. We are confident that Binance will emerge as a stronger company as we lay the foundation for the next 50 years.”

They specifically point out that U.S. authorities have found neither that Binance misappropriated users’ funds nor that it was ever involved in any market manipulation. 

These statements serve to reiterate that the Binance affair is completely different from, for example, FTX and other crypto entities that went bankrupt because funds were not safely guarded. 

It appears, however, that since yesterday customers have withdrawn more than $1 billion of their own funds from the exchange. 

Statements from US authorities

Of a decidedly different tone were the statements of the U.S. authorities. 

The Justice Department held a press conference in victorious tones.

Attorney General Merrick B. Garland even claimed that Binance would become the world’s largest crypto exchange in part precisely because it had committed the crimes that the exchange itself acknowledged it had committed. 

Garland stated: 

“In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world’s largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal.”

Treasury Secretary Janet Yellen’s statements were also interesting. 

Although she has always been very critical of the crypto sector, this time she seemed to be more possibilistic, as she wrote that if crypto exchanges want to be part of the U.S. financial system they simply have to comply with the rules. 

At one time she seemed to want to simply prevent everyone from doing so, but this time she explicitly agrees that they should do so as long as, trivially, they abide by the rules that everyone is required to abide by. 

Even the Treasury Department’s statements go in that direction. 

They say: 

“Wherever located, virtual currency exchanges and financial technology firms should, like any other financial institution, ensure they adopt a managerial commitment to compliance at the very top, and that risk-based programs and controls are integrated effectively into their platforms and technology from “Day One”.”

The breakthrough

This has the flavor of a real breakthrough. 

Not only, of course, with regard to Binance, but also with regard to the U.S. attitude toward the crypto industry. 

Here, in the face of the “case of cases,” the U.S. authorities simply call for compliance with the laws, in effect implicitly admitting that the crypto sector can continue to operate undisturbed even in the US if it can comply with those rules that everyone else complies with as well. 

It immediately comes to mind that companies that have been operating in full compliance with regulations for a long time now, such as BlackRock, are about to enter the industry, so the crypto sector is maturing quite a bit. 

It is probably no longer the Wild West, but a normal extension of the global financial system.