How stable is the leading crypto exchange?

“So what’s bringing crypto down is: The biggest exchange that launders money for the Iranians lost confidence in the second biggest exchange whose founder said that crypto is basically a ponzi scheme on the Odd Lots podcast?”

So much reading Tweet by US reporter Evan Lorenz has it all. The fact that the second largest crypto exchange around founder Sam Bankman-Fried (SBF; now ex-billionaire) faces insolvency within days and has to be rescued by industry leader Binance within hours through a buyout shows how volatile that crypto is – business has become. From $32 billion valuation to near bankruptcy in 10 months – FTX sets negative records.

And now everyone is looking at Binance. While FTX and SBF were indeed hyped up as the saviors of the crashed crypto industry in recent months (purchase of Voyager; call option of BlockFi; SBF joins Robinhood), the flow has turned completely live before the eyes of the interested world audience. SBF loses 94 percent of its $16 billion fortune and billionaire status (more on Bloomberg) in a matter of days, and the only one who can summarily save it is its first investor – CZ. Binance CEO Changpeng “CZ” Zhao is partly to blame for the crash because he publicly questioned the value of the FTX token FTT (a kind of voucher for cheaper trades on FTX). A few tweets later: bang, FTX is almost dead and Binance is ready to pounce.

BNB: The US Securities and Exchange Commission is investigating Binance’s coin

Binance – the last major pillar of the crypto market

Binance appears to be the latest domino in a string of companies that have collapsed since the crypto crash due to high inflation. First, the crypto fund Three Arrows Capital (3AC) collapsed due to the Terra/LUNA crash, then Voyager Digital, Celsius Network, BlockFi, Vauld or Nuri quickly fell, all of which (via detours) had exposure to the Terra ecosystem. Then SBF entered the scene with FTX and got ready to buy some of these companies (and thus above all their users). Then Binance FTX suddenly has to support.

How stable is Binance? With a trading volume of $45 billion in the last 24 hours and 16 million weekly visits from users, the crypto exchange is approximately ten times larger than competitors such as Coinbase, Kraken or FTX. The market share of centralized crypto exchanges is 50 percent and more. In addition, the internal BNB token (a utility token similar to FTT for paying fees on the Binance exchange) with a market capitalization of $50 billion is the largest cryptocurrency in the world behind Bitcoin, Ethereum and stablecoin Tether. With BUSD, Binance also has the third largest stablecoin on the market and is trying to wrest market share from the two market leaders USDT and USDC.

In addition, Binance became a major investor in Twitter with $500 million and started its own fund with another $500 million to rescue ailing Bitcoin mining companies. Theoretically, if Binance were to get into trouble as well – it would be a threat to the entire crypto industry.

Binance: Suspicion of money laundering in the billions – Exchange counters

Where is the company headquarters?

Binance itself is by no means stable. For many months, the company has been acquiring subsidiaries and licenses in dozens of countries, including Austria, Italy, Germany and France. Until now, the crypto exchange has operated from virtual space and cannot even state where the company’s headquarters are. Meanwhile, Binance CEO CZ is constantly traveling back and forth between Paris and Dubai, promoting his case at conferences such as the Web Summit in Lisbon.

The example of the Netherlands shows how dangerous this state of limbo is for Binance. There, the central bank imposed a fine of three million euros because Binance offered its services without the necessary permission from the local authorities – thus violating the rules on combating money laundering and terrorist financing. The Netherlands can set a precedent, which is why Binance is looking for more legal certainty in as many countries as possible. It currently looks like Paris will be the company’s European headquarters.

No license: million fine for Binance in the Netherlands

In the eyes of the authorities

Regulators have long ago zeroed in on Binance. For example, the powerful American authorities. In September 2022, it was announced via Reuters that as early as 2020, the US judiciary should have challenged documents from the world’s largest crypto exchange in relation to anti-money laundering measures. The case is particularly delicate because Binance is said to have violated sanctions against Iran; According to Reuters, Binance is said to have helped Iranian companies trade $8 billion despite sanctions.

However, money laundering and terrorist financing and related allegations are a long-standing problem at Binance. Cryptocurrencies are popular with cybercriminals because of the supposed anonymity to move value internationally. Also via Reuters, it became public in the summer of 2022 that Binance was said to have been used by hackers, fraudsters and drug dealers to launder $2.35 billion worth of crypto assets. Binance has never really denied this, but pointed out that the facts and figures in the report were not correct, adding: “Neither our industry nor Binance is perfect.”

The US Securities and Exchange Commission is also interested in details about the Binance token BNB, which traders can use to get cheaper trading fees on the exchange – a kind of digital voucher. But is it really just a utility token or is it more of a security that represents a virtual stake in the crypto exchange? If so, Binance would have illegally dumped shares on the market.

CZ is trying to calm the market

Founder CZ is fully aware that Binance is now in the spotlight due to the FTX deal. Therefore, just in case, he tweeted on Tuesday evening that he would soon provide proof that all user deposits really existed and that there could not be a payout freeze like with FTX. in”SAFU Insurance Fund” (SAFU stands for “Secure Asset Funds for Users”) would be $1 billion in the form of BTC, BUSD and BNB.

And also, he tries to show that Binance is not like FTX. His company wouldn’t use custom tokens as collateral, nor would they lend out cryptoassets — all the things that hit FTX, Celsius Network, Voyager Digital and co.

Binance: Suspicion of money laundering in the billions – Exchange counters

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