The world’s largest crypto exchange is in trouble with the US government (2024)
Binance, the world’s largest cryptocurrency exchange, is dealing with some major uncertainty after getting hit with a lawsuit from the US’s Commodity Futures Trading Commission, or CFTC. It’s the latest example of the increased federal scrutiny the industry has been under following a wave of scandals in the last few years.
The lawsuit, which was filed on Monday, alleges that Binance intentionally evaded US laws including failing to register in the country and allowing Americans to trade crypto derivatives, which is barred for retail investors. Binance CEO Changpeng Zhao has called the lawsuit an “incomplete recitation of facts” in response. Since then, investors who use the platform have pulled out $1.6 billion, a significant uptick in withdrawals, though experts note that Binance’s reserves may be big enough to withstand such a hit.
The lawsuit could have bigger impacts for Binance’s business long-term, according to a report from CNN’s Allison Morrow. If the CFTC suit is successful, it could result in “hundreds of millions” in fines as well as a possible ban on Binance’s ability to register as a derivatives trader in the US down the line. That would deal a serious blow to Binance’s derivatives revenues, 16 percent of which comes from the US, CNN notes.
“The cryptocurrency industry has recently faced several significant challenges, beginning with the Terra/Luna meltdown, followed by FTX, and now Binance,” says MIT Cryptoeconomics Lab founder Christian Catalini. “Concerns regarding Binance’s compliance and regulatory practices have been raised for some time, and the evidence brought forth by the CFTC is quite damning.”
What this could mean for crypto overall
For those who may not know Binance as well, it’s one of the biggest crypto exchanges in the business and it handled approximately $23 trillion in trades in 2022. Previously, Binance also reportedly considered bailing out cryptocurrency exchange FTX when it declared bankruptcy amid its founder Sam Bankman-Fried’s legal troubles, though it ultimately decided against doing so. Binance is well-known globally and is a dominant exchange abroad, while other exchanges like Coinbase are more established in the US.
One of the core issues in the Binance lawsuit is that it willfully tried to avoid US regulations by allowing American customers to engage in illegal purchases and trades via VPN and other tactics that wouldn’t give away their location. The CFTC suit also alleges that the platform hasn’t done enough to combat potential money laundering and other crimes that it could be used for.
The CFTC’s actions highlight how regulators are continuing to confront crypto companies, and also follow another lawsuit from the Securities and Exchange Commission against Ripple Labs, another crypto company.
Recent chaos with companies like FTX has likely emboldened regulators, says Duke University finance professor Campbell Harvey. “Given these meltdowns and bankruptcies, it’s made it a lot easier for regulators to pull the trigger,” he notes.
Such regulatory actions are unlikely to harm the crypto market overall, however, experts say. This week, for instance, the price of bitcoin has remained stable amidst the Binance news. And although Binance has seen large withdrawals, they appear to have the reserves to deal with it and aren’t facing a bank run comparable to that of Silicon Valley Bank. “We don’t know the sort of money in their war chest,” says Campbell. “It’s not clear that has a very big impact on their bottom line.”
Experts caution, too, that US officials need to find a balance between regulations that are too strict, which could have the effect of driving companies outside of the US, and providing a clearer framework for crypto to operate under that protects customers.
“If regulators push too hard, they would just leave. My personal opinion is that it would be a bad thing because then the US doesn’t have a chair at the table,” says William Johnson, a finance professor at University of Massachusetts Lowell.
Changpeng Zhao (Chinese: 赵长鹏; pinyin: Zhào Chángpéng), commonly known as CZ, is a Chinese-born Canadian businessman. Zhao is the co-founder and former CEO of Binance, the world's largest cryptocurrency exchange by trading volume as of July 2024.
, the billionaire founder of the world's largest cryptocurrency exchange, Binance, pled guilty on Tuesday to failing to maintain an effective anti-money laundering program, potentially allowing bad actors of all kinds to use the platform to move money.
As Bitcoin is decentralised, the network as such cannot be shut down by one government. However, governments have attempted to ban cryptocurrencies before, or at least to restrict their use in their respective jurisdiction. Governments could still try to jointly ban Bitcoin.
FTX was a leading cryptocurrency exchange that went bankrupt in November 2022 amid allegations that its owners had embezzled and misused customer funds. Sam Bankman-Fried, the CEO of the exchange, was sentenced to 25 years in prison and ordered to repay $11 billion.
What happened to FTX? FTX and FTX.US crashed due to a lack of liquidity and mismanagement of funds, followed by a large volume of withdrawals from rattled investors. The value of FTT plummeted, taking other coins down with it including Ethereum and Bitcoin, which reached a two-year low on Nov. 9, 2022.
Coinbase is the largest U.S.-based cryptocurrency exchange, trading more than 200 cryptocurrencies. Its fees, however, can be confusing and higher than some competitors.
Key Takeaways. As of March 2024, bitcoin was legal in the U.S., Japan, the U.K., and most other developed countries. In general, it is necessary to look at laws in specific countries. In the U.S., the IRS considers bitcoin and other cryptocurrencies property, issuing appropriate tax treatment guidelines for taxpayers.
Statutes that Authorize Judicial Forfeiture of Cryptocurrencies. If the government believes that your property represents the proceeds traceable to criminal activity, then it might be seized and subject to forfeiture proceedings pursuant to 18 U.S.C.
If you are looking to trade on a highly secure, regulated crypto exchange that offers a large number of supported cryptocurrencies, Gemini is your go-to choice. If you are looking to trade a wide range of new and small-cap crypto tokens, BitMart is arguably the best choice.
The bankruptcy teams appointed will work hard to assess the failed exchange and create a payback plan. However, depending on the circ*mstances, you might not receive a payment for several months. It may take a year or more to finalize a payment plan; even then, you may only get a portion of your funds back.
Kaplan found that FTX customers lost $8 billion, FTX's equity investors lost $1.7 billion, and that lenders to the Alameda Research hedge fund Bankman-Fried founded lost $1.3 billion. He imposed an $11 billion forfeiture order and authorized the government to repay victims with seized assets.
Those who lost money when the exchange collapsed in November 2022 are owed around $11 billion, but the estate been able to recover as much as $16.3 billion, court records filed on Tuesday show. As a result, claims will be repaid with interest.
FTX Trading Ltd., commonly known as FTX (short for "Futures Exchange"), is a bankrupt company that formerly operated a cryptocurrency exchange and crypto hedge fund.
What is the safest crypto to buy now? Bitcoin (BTC), Ether (ETH), and stablecoins like Tether (USDT) are considered safer options due to their history and stability. Remember, cryptocurrency markets are volatile, so it's crucial to always do thorough research before making any investments.
The ownership structure of Coinbase Global (COIN) stock is a mix of institutional, retail and individual investors. Approximately 30.37% of the company's stock is owned by Institutional Investors, 10.23% is owned by Insiders and 59.40% is owned by Public Companies and Individual Investors.
Kraken is often cited as the most secure, as they are the longest-standing exchange that has never been hacked. Kraken's security is so top-notch that they even have Kraken Security Labs, an arm of their company that offers security services for other crypto companies. SwissBorg is another exchange considered safe.
The answer is, technically, yes. However, any attempts to ban or regulate Bitcoin out of existence are improbable to succeed. Bitcoin itself is decentralized. Any attempts to shut down Bitcoin would mean all the governments worldwide would have to collaborate and shut down the internet at the same time.
Cryptocurrencies are traceable, with transactions recorded on a public ledger accessible to the IRS. The IRS uses advanced methods to track crypto transactions and enforce tax compliance. Centralized exchanges provide user data to the IRS. Use crypto tax tools like Blockpit for accurate reporting and compliance.
Who Is the Crypto Regulator? In the U.S., who regulates crypto depends on how and where it is used. The Securities and Exchange Commission, the Chicago Mercantile Exchange, the Commodity Futures Trading Commission, and the Financial Industry Regulatory Authority are all involved in some regard.
A reasonable assumption that Bitcoin could hypothetically reach the null state of it's value is worth the thought. Even-though such an event is very less likely to take place, there are some factors that could theoretically lead to Bitcoin price crashing to zero.
Introduction: My name is Barbera Armstrong, I am a lovely, delightful, cooperative, funny, enchanting, vivacious, tender person who loves writing and wants to share my knowledge and understanding with you.
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