Binance CEO CZ agreed to step down from the exchange in November 2023. He pleaded guilty to a money laundering charge and admitted that Binance did not implement proper KYC/AML processes, did not file suspicious activity reports, and knowingly allowed criminals and sanctioned individuals to transact on Binance. Binance will pay a $4.3 billion fine as a result, CZ cannot exercise any authority or control over Binance for the next 3 years and will likely spend some time in jail.

Interestingly enough, this deal was concluded between  Binance and the US DOJ + Department of Treasury, and excluded the SEC, which means that a) SEC is still going to try and go after Binance for securities law violations, and b) US DOJ + Department of Treasury most likely did not review how Binance handled customer funds or insider trading aspects of Binance,  it is not their remit, so they focused purely on sanctions, terrorist financing connections, and other AML aspects. SEC claims that Binance had practices similar to FTX, with respect to insider trading, using their own tokens as collateral, and commingling of the customer funds… frankly, I would not be surprised.

Binance has been the largest crypto exchange in the world by volume for several years, and to be honest, I expected their downfall for some time. To be fair, they really mastered marketing, gamification, token listings, and scalability like nobody else, and they probably helped crypto adoption like no other company. At the same time, it was not good for the crypto industry’s reputation that the largest platform in the crypto was so shady and controversial. From now on, they will probably lose a lot of their past volumes, discontinue many of their offerings, ask all users to re-KYC, report tons of past activities to law enforcement agencies, and become an increasingly boring platform.

Now, the question is: is it a good fresh start or an end of the era?

I have a theory that the crypto industry now will follow the fragmentation trends that happened to the corporate media: several large institutional players will align themselves with and will be heavily controlled by the governments, large corporate sponsors, and special interests, and in parallel many small independent platforms will continue offering their unique services to the unique loyal users and followers. Cryptocurrencies and DeFi have originally emerged as alternatives to traditional finance, offering greater transparency and accessibility and better control over your funds. Likewise, independent journalists are leveraging digital platforms to bypass traditional gatekeepers and deliver unfiltered, uncensored news and insights to their audience. Binance was probably the last large crypto company that played an industry cowboy, and it did not end well for them. From now on, it would be extremely hard to get so big and remain so wild in crypto. In a way, one could argue that if someone wants to innovate, try new technologies, and experiment with new financial products, they should stay under the regulatory radar and not even try to become big and popular. Erik Voorhees in crypto is almost like Joe Rogan in media: very influential, very credible, and still very niche and unthreatening for the mainstream establishment.

I am almost going to miss CZ, seriously. How do you feel about it?

Don’t miss this fresh episode on the Compliance That Make Sense podcast today! Listen now! 🎧

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