Bitcoin and cryptoassets registered gains this week amid the US Treasury’s landmark settlement with Binance, the largest global crypto exchange. Binance CEO CZ stepped down as part of a $4.3 billion settlement with the US government. The announcement from CZ and multiple agencies on Tuesday marked the conclusion of yearslong investigations by the Department of Justice and other agencies into anti-money laundering violations and sanctions violations. US equity indexes also ended the week higher while US government bond yields were rangebound following the release of November monetary-policy meeting minutes. Tuesday’s FOMC minutes revealed that Fed had little appetite for cutting interest rates and wants more evidence before changing its stance. Fed officials highlighted ongoing risks of stronger-than-expected inflation that remains well above their target goal of 2%. In macroeconomic data, US existing home sales in October fell to 3.79 million – the lowest level in 13 years – amid low affordability and high interest rates.
It was a significant week for government agencies taking action against crypto firms and individuals in the US. On Tuesday, Binance founder and CEO Changpeng Zhao (CZ) stepped down and pled guilty to violating US anti-money-laundering (AML) regulations. Binance is the world’s largest cryptoasset exchange and accounts for roughly 60% of global crypto spot trading. As a settlement, Binance Holdings Ltd. and its affiliated companies admitted guilt to charges and committed to paying a penalties amounting to $4.3 billion to the US government, encompassing both civil and criminal proceedings. The historic $3.4 billion portion of the settlement paid to FinCEN is the largest penalty in US Treasury and FinCEN history. Binance settled with FinCEN and OFAC for violations of the Bank Secrecy Act (BSA) and apparent violations of multiple sanctions programs. US Secretary of the Treasury Janet Yellen said that “Binance turned a blind eye to its legal obligations in the pursuit of profit”, adding that “Today’s historic penalties and monitorship to ensure compliance with US law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime, or face the consequences.”
In this settlement, CZ will maintain ownership of Binance but will be restricted from holding an executive position within the company for a minimum of three years. In an internal memo to the firm’s staff, CZ wrote that he will have to “deal with some pain but will survive.” Meanwhile, Binance named Richard Teng as new CEO who previously worked as the firm’s Global Head of Regional Markets. The business will continue its operations and implement a third-party monitor to ensure adherence to global AML regulations. Importantly, the DOJ did not charge Binance with misappropriating customer funds (unlike in FTX’s case). This might explain why overall, outflows on Binance were limited in the wake of the announcement. According to crypto analytics firm Nansen, the exchange experienced withdrawals to the tune of $1.7 billion – compared with customer assets of more than $60 billion and an additional $6 billion in corporate assets.
Crypto market participants have been debating what this means for the industry. Many have considered the settlement a net positive for crypto, in part because it could reduce systemic risk from a potential collapse of Binance. Some investors also viewed this a necessary and long overdue move given that Binance’s fast-moving and lax approach has violated AML laws and sanctions laws, thus harming the industry. After this week’s enforcement action against Binance and the failure of FTX, the days of large, unlicensed, off-shore crypto exchanges seem to be over. In the past, US-based trading venues that played by the rules, such as Coinbase and Kraken (see also recent SEC action below) could be among the beneficiaries. In a post on X, Kraken co-founder Jesse Powell said the game “feels a bit more fair today” in reference to the Binance fine. Some investors also consider the settlement to be beneficial to a spot Bitcoin ETF approval. Arguably, one of the major hurdles to an approval in the past was the fact that Binance dominated spot Bitcoin trading, with the exchange accounting for about 80% of volumes at one point. In summary, the settlement is likely to be a net positive for the industry, especially in the long-term, ultimately improving compliance and trust in the industry which in turn could pave the way for more participation from institutional investors.
A day earlier, crypto exchange Kraken was sued by the SEC over alleged securities laws violations. This was the second time that the SEC took action against Kraken since February. The lawsuit against Kraken in California is similar to the suit that the agency brought against Coinbase in New York earlier this year. “Without registering with the SEC in any capacity, Kraken has simultaneously acted as a broker, dealer, exchange and clearing agency with respect to these crypto asset securities”, the SEC stated. Kraken argued that the SEC is “demanding compliance with a regime that doesn’t exist”. Elsewhere, offshore stablecoin issuer Tether (USDT) said it “proactively and voluntarily” froze around $225 million worth of USDT stored in self-custodied wallets linked to a human trafficking syndicate. The move was a response to an investigation involving the US Department of Justice that also saw participation from crypto exchange OKX and crypto forensics firm Chainalysis.
Market Overview
The global cryptoasset market capitalization currently amounts to roughly $1.49 trillion – compared with $1.44 trillion last week, with bitcoin accounting for about 49.5%. Among the Top 30 cryptoassets by market cap, Uniswap (UNI) outperformed, gaining about 23% over the week. The price of bitcoin (BTC) rose by 3.1% to $37,653 while the price of ether (ETH) increased by 6.7% to $2,070. The total value locked (TVL) in DeFi is sitting at roughly $48 billion, with Ethereum (excluding Layer 2s) currently accounting for about 55% of TVL.
This Week’s Headlines
- “No reason” for SEC to deny a spot Bitcoin ETF, says SEC Commissioner Hester Peirce
- UK finance minister announces legislation to boost the nation’s digital asset sector
- Genesis seeks to recover $689 million of “avoidable transfers” from Gemini in ongoing legal battle
- SEC recently met with Grayscale, BlackRock over spot bitcoin ETF listings, memos show
- GBTC’s discount to NAV drops to below 10% for the first time in two years
- Mt. Gox to start repaying creditors in cash this year, trustee says
- Heco bridge appears to have been drained of $86.6 million
- DeFi protocol KyberSwap loses almost $50 million in possible exploit
- Taiwanese trading firm Kronos Research hacked for estimated $25 million
- Bitcoin transaction costs surpass those on Ethereum amid Ordinals resurgence
Notable Deals and Fundraising
- Ex-NYSE president Tom Farley’s Bullish buys CoinDesk in all-cash deal
- CoinGecko buys NFT data startup Zash in its first acquisition
- Blur‘s Ethereum Layer 2 Blast goes live in early access after $20 million raise
- Blockchain tools provider Privy raises $18 million in Series A round led by Paradigm
- Panoptic raises $7 million to build a perpetual options platform for DeFi
