The US authorities and the largest crypto exchange Binance reached a pre-trial settlement: the head of the exchange admitted guilt and resigned, and the platform itself will pay a $4.3 billion fine. CFO and renowned ASTL project analyst Konstantinas Sizovas looks at how this is affecting the market.
The largest cryptocurrency exchange Binance will pay a fine of $4.3 billion to the United States for violating legal requirements; the founder and CEO of the exchange, Changpeng Zhao, pleaded guilty to the company and himself. The fine is one of the largest ever collected in a criminal case in the United States. According to the US Department of Justice, Binance has become a leader in the crypto market, including due to the crimes committed. The department’s statement said that exchange employees knew that the company was servicing thousands of clients in sanctioned countries, and were also aware that transactions between clients from such countries and US citizens would be a violation of the law. “Binance has put its profits ahead of the safety of Americans,” said US Attorney General Merrick Garland. A frank statement. Egocentrism and snobbery of individual representatives of the US authorities in all its glory.
The news about the pre-trial settlement cannot be called completely unexpected. Most traders and investors who have been working with cryptocurrencies for a long time were hoping for just such an outcome. But the departure of the “ideological leader of the exchange” Changpeng Zhao “stunned many,” our expert notes. “I admit a strong outflow of users from the trading platform and a strong reduction in its market share. Binance will need a lot of effort and luck in order not to lose the positions it previously achieved,” says Konstantinas Sizovas. The departure of the leader will provoke a redistribution of market shares among the largest crypto exchanges, and each of them will try to strengthen its position. We can expect new promotional campaigns and favorable conditions for switching to other crypto exchanges, he admits.
Binance will most likely lose its leadership position as it will be disconnected from one of the largest markets in the world (USA). Binance itself and specifically its founder were charged with very serious charges, and the fine for the exchange was unprecedented for the crypto industry and one of the largest for the financial sector. Only large banks such as BNP Paribas and Deutsche Bank were fined similar amounts. At the same time, a clear message was given to the entire international crypto industry that, firstly, the American authorities completely control it, and secondly, the United States will not stop the fight against those companies that do not take into account the rules and laws of the United States and promote the use of cryptocurrency in money laundering, financing terrorism and circumvention of sanctions – these are the main postulates from the statements of US Treasury Secretary Janet Yellen and other participants in the press conference organized by the US Department of Justice. Konstantinas Sizovas bitterly states that “the largest crypto exchange in the world was taken under full control, they are forcing it to truly leave the American market and introducing external management. This is an unambiguous signal to all players – follow the rules established in the USA or the business will come to an end.” Compliance requirements for global crypto exchanges will increase, and using cryptocurrencies to circumvent American sanctions will become much more difficult. Large platforms will look back at the situation with Binance and try to avoid such miscalculations.
“The complaints against the exchange were mostly economic and political, and no one focused attention directly on the work of the platform itself. I dare to suggest that this act was done in order to take control of Binance and, in general, to “recover” the market. It is no coincidence that it was Richard Teng, who came from regulatory circles, who was appointed as the new CEO,” our crypto expert argues further. In his opinion, all the necessary decisions “were made before the conference,” and Zhao “was allowed to leave by paying off,” and the period of control over the site prescribed by the prosecutor could be part of the deal. “In the future, this may lead to stricter regulations for end users in all countries. Perhaps this is precisely why an alternative was created in advance,” adds Konstantinas Sizovas.
In our opinion, users can expect stricter KYC (Know Your Customer) and AML (Anti-Money Laundering) policies, as well as compliance with US sanctions. “The complaints against the exchange were mostly economic and political, but no one focused attention directly on the work of the platform itself,” Konstantinas Sizovas further argues.
By the way, in September, Binance already announced, to please US regulators, its complete withdrawal from Russia. Representatives of the exchange reported that its Russian business was sold to the CommEX platform, and users will gradually be transferred to the new platform. But if we talk about the risk group, the Russian segment is “already methodically being withdrawn” from the global exchange into a separate segment represented by CommEX, the expert notes.
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