Behind the $4.3 billion fine, is the sanction on Binance and CZ a positive or negative thing?

More than 10,000 BTC, nearly 100,000 ETH, 400 million USDT, 150 million USDC, and $2.2 billion worth of ALT. These five data are the withdrawal data from Binance in the past 24 hours. Although Binance still holds more than $67 billion in assets, the withdrawal wave has not ended yet. Assets are still flowing out of Binance almost every minute . When almost the entire network was bidding farewell to CZ, half of Bloomberg's front-page headlines went to Hamas and half to CZ and Binance. If we go back in time, I wonder how many friends still remember that in October I focused on the House Financial Services Committee's relentless pursuit of cryptocurrency as a means of financing terrorism. Last week, 57 members of Congress even jointly asked Biden and Yellen to give detailed information on the support of cryptocurrency for terrorist activities on the 27th of this month.

Fast forward to the present, of this sky-high fine of $4.3 billion, the settlement amount to the Financial Crimes Enforcement Network (FinCEN) is $3.4 billion, and the settlement amount to the Office of Foreign Assets Control (OFAC) is $968 million. Of the $3.4 billion paid to FinCEN, $2.7 billion was paid to the Commodity Futures Trading Commission (CFTC), $1.35 billion of the $2.7 billion was transaction fees charged to U.S. customers, and another $1.35 billion was a fine. In addition, CZ himself was given a suspended fine of $150 million. From this perspective, Binance’s biggest problem should be allowing U.S. customers to participate in transactions. After all, the fine for this part is the highest.

But in fact, the answer given by the Ministry of Commerce, the highest agency that actually investigated Binance this time, is that it is neither allowing Americans to trade nor violating securities laws. These are the affairs of the SEC. By the way, this settlement represents the end of a years-long investigation by Binance and the Treasury Department, the Justice Department and the Commodity Futures Trading Commission (CFTC), but it does not include the U.S. Securities and Exchange Commission (SEC). We will talk about this issue later. It is because Binance violated the U.S. Anti-Money Laundering (AML) and sanctions laws that protect U.S. national security and the integrity of the international financial system. In plain words, Binance did not strictly control the composition of traders on the platform, allowing terrorists defined by Europe and the United States, including Hamas, to use it is the most intolerable thing for the United States , and the rest is just a matter of money.

Therefore, in this report, both the Ministry of Commerce and the Ministry of Justice defined Binance as not having a good implementation of AML. Even the Commodity Futures Trading Commission (CFTC) provided records of Binance staff chatting about Hamas buying an AK47 for less than $600 in the actual prosecution. This is what makes Binance most worried . Violating AML and providing funding for terrorism are two completely different things. Fortunately, the direct answer given by Yellen this time is that Binance simply did not strictly implement AML, and CZ also admitted to the charges of anti-money laundering and violating US sanctions. This has enabled Binance to avoid the biggest crisis. It can even be said that from today, the only problem facing Binance, including BinanceUS, is money, and money is the least worrying issue for Binance.

According to the plea agreement, CZ's maximum 10-year prison sentence will be reduced to no more than 18 months. Currently, CZ has given up the appeal, and the sentencing will be postponed for 6 months . After paying a bail of 175 million US dollars, he was released and can travel between the UAE and the United States at any time. Arthur Hayes, co-founder and former CEO of BitMEX, also experienced this treatment. At that time, Arthur Hayes was sentenced to 6 months of home confinement and 2 years of probation. From this perspective, CZ is likely to be in home confinement. But this is not the point. The point is that Arthur Hayes, who retired as CEO, is still the co-founder of BitMEX. Although he does not work for BitMEX, he can "jointly" handle BitMEX's affairs as a consultant.

At this point, some smart friends may have thought of it. It is true that CZ is no longer the CEO. It is true that CZ said in his autobiography that he would take a break recently, but this does not mean that CZ is away from Binance. Although CZ is no longer the CEO, He Yi, the co-founder of Binance, has not been implicated in this issue . I don’t need to say more about her relationship with CZ, so has Binance changed? No, CZ’s role is more of a decision maker than an executor. It doesn’t matter whether he is the CEO or not. The CEO is just working for the board of directors. This case did not deprive CZ of his status as a director, and the United States did not deal with BinanceUS in the same way as it dealt with TikTok. CZ can even continue to speak for Binance on Twitter.

From the perspective of interim conclusions, the United States used a reason that Binance could not ignore, forcing Binance to make the final decision , "Either you follow my rules and play within the framework of my rules, or you don't play anywhere." This is why I emphasized earlier that Binance only violated AML, not provided support to terrorists. These two decisions are actually just a matter of thought. If you obey, it is the former, and if you don't obey, it is the latter. Choosing the former and being fined is not the purpose. Does the United States lack this $4.3 billion? What the United States lacks is whether the world's largest cryptocurrency exchange behind this $4.3 billion is under its control. Yellen's words are the best definition, "The result of these agreements will be to end corporate behavior that has long posed risks to the U.S. financial system, American citizens, and U.S. national security."

So far, Binance has been released from the blacklist of risky companies that are "threatening" the United States. This not only means that Binance still has the opportunity to operate BinanceUS, but also means that channels including payment in the United States and Europe can serve Binance again. These are the most important for Binance. I have explained many times before that compliance will be what all exchanges must face if they want to go further. Binance, which has been under the iron fist of multiple departments in the United States, has had to give up many markets. From today, these once abandoned markets and opportunities have the possibility of starting over, and the payment is only a quarter of the profit and CZ nominally leaving the position of CEO. So has Binance changed? It has indeed changed. Binance's imagination will be better after removing the biggest shackles.

After BinanceUS solves the SEC's problems, it will be more likely to be favored by Wall Street and will be one step closer to listing. Speaking of the SEC, we have to mention that the SEC sued Kraken again yesterday, and the reasons for the lawsuit are almost the same as Coinbase. As we said before, the SEC is not included in the settlement in the United States this time, which also means that the SEC's supervision of Binance is not a matter of "political stance". Even with the settlement with the CFTC, Binance has paid the fines and fund confiscations for allowing American customers to trade, so the SEC is unlikely to continue to struggle with this issue. Then the SEC's purpose may be to pave the way for the compliance of cryptocurrencies, and a milestone on this road may be the spot ETFs of Bitcoin and Ethereum.

Of course, for Binance, which has already gotten rid of the biggest shackles, the problem with the SEC does not involve criminal charges. It can even be said that there is no lawsuit between Binance and the SEC. The lawsuit is between BinanceUS and CZ himself. The result is nothing more than either a hard fight like Coinbase and Kraken, or a settlement. No matter which one, it is just a matter of money. From my personal understanding, the latter is more likely. After all, Coinbase is a listed company in the United States, Kraken is also a compliant exchange in Europe and the United States, and BinanceUS is essentially an important layout for Binance to be listed in the United States and tie up Wall Street funds. The biggest problem between BinanceUS and the SEC is Binance itself and CZ itself. Now the former is fine, and the latter has also accepted the penalty.

Then as long as BinanceUS chooses to settle with the SEC, then BinanceUS's road to listing will be smooth. Of course, the most critical thing is the settlement conditions between BinanceUS and the SEC. So when we finally look at this issue from a bird's eye view, we can know that it is a win-win situation overall. The United States has removed an uncontrolled financial risk, and Binance has removed the United States' long-arm jurisdiction for several years and the collateral damage it brought. The so-called sky-high fine is the first step of Binance's "compliance certificate", and as for CZ, he just removed an unimportant title, but gained the "identity" to enter and exit the United States freely. It also means that Binance and CZ can participate in the political and economic fields of the United States in the sun. On the contrary, what I want to know most now is, is it the Democratic Party or the Republican Party? It must be one of them.

The adult world is more concerned with interests, whether it is national interests, corporate interests or personal interests. Whether Binance is really one of Hamas’s financing channels this time is not the most important thing. The most important thing is that once this hat is put on, what Binance faces is no longer just a "cat and mouse" game of economic interests, but it has risen to the level of national security. This is not something that can be solved by spending money. What we see and what is disclosed is a "transaction" of US$4.3 billion, but underneath it is a life and death line for Binance and CZ, and the result is that Binance and CZ completed the identity transformation at the "least valuable" price. The sudden rise and fall of Coinbase's stock price last night is the best proof of this.

This incident of Binance not only failed to increase the market value and market potential of Coinbase, but also made the market realize that Binance, after getting rid of the shackles, has the qualifications to challenge Coinbase in the United States once and for all. This incident is both a minefield and a positive for the cryptocurrency industry itself . At least in the foreseeable two or three cycles, as long as Binance does not commit suicide, it will go more and more smoothly. In fact, FTX and Sam have given the best process. The FTX main site has developed wildly. As long as it is under the framework and supervision of the United States, it can do whatever it wants. FTXUS is a "money-making" tool in the United States. Compliance, binding Wall Street, and listing are the smooth road for BinanceUS.