On Tuesday, November 21, in local U.S. time, Binance and its CEO Changpeng Zhao (CZ) admitted guilt to criminal charges of money laundering and violating U.S. sanctions, reaching a settlement with U.S. regulatory authorities. This settlement marks the formal conclusion of Binance's years-long investigation and comes at a significant cost to the exchange.
As part of the settlement agreement, Binance agreed to plead guilty and pay a fine exceeding $4 billion. Changpeng Zhao agreed to resign and pay a $50 million fine, while also admitting guilt in a Seattle court on Tuesday. The negotiated settlement will resolve all charges related to criminal misconduct, involving entities such as the U.S. Department of the Treasury, the U.S. Department of Justice, the U.S. Office of Foreign Assets Control, and the U.S. Commodity Futures Trading Commission.
According to Bloomberg, in a document released on Tuesday, Binance faced three charges, including money laundering violations, conspiring to operate an unlicensed money transfer business, and violating U.S. sanctions. The allegations by the U.S. Department of the Treasury include failure to prevent and report suspicious transactions with terrorist organizations, including Hamas' Al-Qassam Brigades, Palestinian Islamic Jihad, Al-Qaeda, and the Islamic State in Iraq and Syria. This announcement came amid the war between Israel and Hamas over six weeks ago. Court documents revealed that Binance allowed at least 1.1 million transactions, involving a value exceeding $898 million, related to Iranian customers.
The fines will be distributed among the U.S. Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC), and other agencies. This includes $3.4 billion to be paid to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury and $968 million to be paid to its Office of Foreign Assets Control for violations of the Bank Secrecy Act and sanctions regulations.
While this settlement is a significant blow to Binance, it may open the door for greater compliance in the entire crypto industry. More exchanges are likely to strengthen their compliance initiatives and become part of monitoring-sharing agreements, contributing to the approval of a Bitcoin ETF in the U.S. Monitoring the trading volume between regulated and unregulated cryptocurrency exchanges could become a crucial indicator in 2024, compared to the volume between centralized and decentralized exchanges.
With this plea agreement, expectations for a spot Bitcoin ETF may have risen to 100%, as the entire industry will be compelled to adhere to rules followed by traditional financial companies. Importantly, the whitewashing of this industry will strengthen institutional investor cases for adopting Bitcoin and potentially position Bitcoin as a hedge asset in investment portfolios.
Next month, the FTX Exchange may be sold and operated by a management team compliant with U.S. securities laws, potentially relaunching the exchange in the third quarter of 2024. Any Bitcoin ETF listed in the U.S. could see an influx of $24 billion to $50 billion, as we have witnessed crypto companies trading on the Chicago Mercantile Exchange (CME). A shift from unregulated "wild west" exchanges serving retail investors to fully regulated and compliant venues serving institutions is likely to occur. Institutions are on the horizon, and all enforcement actions by U.S. Authorities this year are steps in that direction. With favorable conditions persisting in the macro environment and institutional demand, 2024 is likely to be another strong year for Bitcoin.
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