NEW YORK - Memo to Mr Zhao Changpeng: Crypto markets want you to take the government’s offer.
Binance Coin led a rally in digital asset prices on Nov 20 after Bloomberg reported that the Department of Justice (DOJ) is seeking more than US$4 billion (S$5.3 billion) to end a criminal probe into Mr Zhao and his company Binance, the world’s largest digital asset exchange.
The coin known as BNB rose as much as 8.5 per cent to US$266.42, and Bitcoin climbed as much as 2.1 per cent to US$37,768.
While that penalty would go down as one of the biggest-ever levied against a company by the United States government, traders and analysts are breathing a sigh of relief for the broader market.
There are still questions that need to be answered, including what concessions the government will require of Binance and its leader, but the report provides some clarity that there is a path forward for Binance, said Mr Anil Lulla, co-founder of crypto research firm Delphi Digital.
“It would be great to get this behind us”, he said. “It was an overhang in the industry. And while US$4 billion is not an insignificant number, it’s probably a small price for Binance to pay to move forward from this.”
While the details of Binance’s finances are a closely held secret, the company generated at least US$20 billion of revenue during the crypto boom in 2021, according to a Bloomberg analysis in 2022 of its trading volume and fees.
However, Binance’s combined market share in spot cryptocurrencies and derivatives is on trend to decline for the ninth consecutive month, falling to 43.9 per cent as at Nov 15, according to data compiled by CCData.
Crypto exchange OKX has been the largest beneficiary of Binance’s decline in the derivatives market, with its market share rising from 11.2 per cent to 24.9 per cent since the start of 2023, CCData said.
Negotiations between the DOJ and Binance include the possibility that Mr Zhao could face criminal charges in the US under an agreement to resolve the probe into alleged money laundering, bank fraud and sanctions violations, according to people familiar with the discussions. He is currently residing in the United Arab Emirates, which does not have an extradition treaty with the US. But that does not prevent him from coming voluntarily.
Binance did not respond to e-mails and telephone calls seeking comment. The DOJ declined to comment.
This reaction in the market seems to indicate that the DOJ’s decision is not a systemic risk to the entire industry, said Mr Greg Moritz, co-founder and chief operating officer of crypto hedge fund AltTab Capital.
“Binance isn’t short on capital and monetary fines are often a cost of doing business in an environment where the rules are ambiguous,” he said. “In the long term, this is almost certainly good news as it provides further clarity on what enforcement will look like; and markets love clarity.”
The crypto market has rebounded strongly this year following massive losses in 2022, with Bitcoin more than doubling amid optimism that the Securities and Exchange Commission is poised to approve an exchange-traded fund that invests directly in the oldest and biggest token. BLOOMBERG
