Binance, the largest cryptocurrency exchange in the world by trading volume in recent years, has faced a lot of scrutiny from various watchdogs lately.
Keeping in mind that it is one of the most important companies in the cryptocurrency industry, to date it is worth exploring what the impact of this threat could be for the entire industry or whether it is just a temporary FUD.
The growing list of regulators after Binance
Founded in 2017 following a successful $ 15 million ICO, Binance Exchange quickly rose to fame by attracting huge market share in terms of spot and, subsequently, derivatives trading volume. With the impressive growth, however, has come the attention of global regulators, some of whom have issued warnings or taken official action against the trade.
The situation has recently escalated with the UK’s Financial Conduct Authority (FCA) leading the pack. The watchdog issued a warning to Binance Markets Limited and the Binance Group, indicating that they could not trade in the country.
Shortly thereafter, however, the popular exchange responded by pointing out that “BML is a separate legal entity and does not offer any products or services via the Binance.com website.” Basically, nothing had changed, the company said.
Despite the company’s reassurances, however, other watchdogs have joined the trend. Japan was among the first, followed by Singapore and, on the first day of July, the Cayman Islands joined the list, stating that “Binance is not authorized to operate in the islands”.
Just a day later, on July 2, 2021, the Thai SEC took another step forward. Instead of simply issuing a warning, the regulator filed a criminal complaint against the exchange for running a digital asset business without a license.
Real threat or just FUD?
Having multiple watchdogs chasing you seems like a major obstacle. The exchange faces extreme scrutiny in the 2020-2021 bull market which has seen prices within the entire space skyrocket by triple-digit percentages in months. However, such claims against one of the largest companies in the industry could lead to a setback.
According to industry analyst Adam Cochran, all of these developments don’t seem like coordinated attacks.
Instead, Cochran outlined some more plausible scenarios. In the first, he points out that a larger nation might try to build a case and has “asked for favors” from other regulators. On the other hand, there is a collaboration to some extent to prosecute a criminal organization that has used Binance.
2) There is some collaboration here in building a case to prosecute a criminal organization that used / exploited Binance internationally and legal pressure on Binance helps that case.
– Adam Cochran (@adamscochran) July 2, 2021
However, the analyst wrote that the rapid expansion of the exchange was his “only fault”. Now, the company will have to work with all regulators as it has entered a gray area.
Jake Chervinsky, an influential cryptocurrency lawyer, commented comment that mass cooperation by watchdogs is possible in this case, especially given Binance’s size and exposure.
Whether it’s a real threat or a FUD, the short history of cryptocurrencies teaches us that anything against the latest industry leader could have serious consequences for the entire ecosystem that risks severely impacting the price of bitcoin in the short term. .
Binance and MT.Gox ‘2014: One Exchange Takes It All
Binance, by far, is a leader in this sector: it has an investment arm, a springboard for newly launched tokens, it also represents the fourth largest cryptocurrency by market capitalization – Binance Coin (BNB) – with a current market capitalization. nearly $ 50 billion at the time of writing.
Binance FIAT-to-crypto gateway is the starting point for many new traders and investors who buy their first cryptocurrencies. According to CoinGecko, the daily trading volume is far ahead of other spot trades. For example, on the day of this report, Coinbase, the second on the list, represents only 10% of the volume traded daily on the Binance Spot Exchange.
In its short history, the cryptocurrency industry has seen a similar (but different) development where one exchange controlled the vast majority of bitcoins and cryptocurrencies traded. This happened in 2013 – 2014: a notable company received a severe blow, which affected the entire market. mt. Gox stands out.
The infamous attack on the platform, in which hackers accessed and stole more than 700,000 bitcoins from the exchange’s wallets and 100,000 coins from the company, occurred in early 2014. At today’s prices, these numbers have value. of approximately 3.4 billion dollars.
The effect of the MT.Gox collapse was devastating. Somehow predictably, prices in the cryptocurrency market plummeted right after the event. They collapsed after other hacks as well, but, in the end, Bitcoin and the industry prevailed, even though some of the exchanges were gone.
Looking at the price chart, BTC recorded its previous November 2013 all-time high of over $ 1150, however, following the collapse of MT.Gox, Bitcoin dropped below $ 400 just three months later.
Things have obviously changed since then. While both MT.Gox and Binance control most cryptocurrency trading markets, legitimate alternatives exist today, particularly for FIAT, the cryptocurrency gateways. To name a few, there are US-based regulated exchanges Kraken and Coinbase, as well as EU-based Bitstamp.
On the other hand, altcoin markets could face huge problems in the event that legal action is taken against Binance, due to the fact that Binance specializes in altcoin (crypto-to-crypto) trading markets.
If history is any indicator, the crypto space is expected to persist over the medium to long term, even if the pressure on Binance is so severe that the exchange succumbs to regulatory scrutiny and there could be an immediate short-term price effect.
CZ: Ignore the FUD
Binance CEO Changpeng Zhao (CZ) recently tweeted to “ignore the FUD” in response to the claims of the UK FCA. He later sent an open letter to the community in which he compared current developments in the cryptocurrency market with what happened over a century ago when cars started to emerge:
The adoption and development of cryptocurrencies has many parallels with that of cars. When the car was first invented, there were no traffic laws, no traffic lights, and no seat belts. Laws and guidelines were developed along the road as cars raced on the road.
These are structures and laws that we take for granted today that allow this powerful technology to be used extensively and safely. Cryptocurrencies are similar in that they can be accessible to everyone, but facilities are needed to prevent misuse and bad actors.
Binance Spokesperson: I haven’t always got everything right
CryptoPotato also contacted Binance for a response to the above claims.
“Binance’s goal has always been to put users first and protect their interests, both through SAFE and in our work to help law enforcement clean up the industry by helping eliminate bad actors.” as we were told by the Binance spokesperson.
Additionally, the spokesperson outlined the exchange’s efforts to improve its compliance team, including the most recent hiring. As previously reported, ex-Jonathan Farnell of eToro has joined as the new Director of Compliance.
Furthermore, the spokesperson admitted that Binance may have made a mistake along the way, but said the company is doing its best to improve.
“We have grown very quickly and we have not always achieved everything exactly, but we are learning and improving every day. We continue to increase investment in our compliance program by interacting with our third-party compliance partners and working to improve our proprietary KYC and AML technology to further strengthen our compliance standards. “
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