Former CEO and Binance founder Changpeng Zhao‘s (CZ) departure from the firm will trigger some short-term volatility in the cryptocurrency market, but crypto will “continue to thrive as more institutional money pours in,” predicts the CEO of an independent financial advisory, asset management and fintech organization.
The bullish prediction from Nigel Green of deVere Group comes as Changpeng Zhao, better known as CZ, the founder of Binance, the largest cryptocurrency exchange in the world, pleaded guilty to money laundering violations on Tuesday and “agreed to pay a $50 million fine and step down from his role as the company’s chief executive.”
The company itself also pleaded guilty and “agreed to pay $4.3 billion in fines and restitution to the government, according to federal authorities.”
Nigel Green says:
“CZ until now has been the most influential and powerful person in crypto. As such, this scandal is going to trigger some short-term volatility in the market as investors digest the news. However, the crypto market will thrive as institutional money is pouring in and we expect it to continue to do so. BlackRock, the $9trillion asset manager, alongside WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise and Valkyrie Digital Assets, have published Bitcoin ETF applications waiting to be approved by the US Securities and Exchange Commission, the SEC.”
He further noted:
“We believe that Bitcoin ETFS are an imminent inevitability, and this would help drive crypto prices and mass adoption. Should SEC approval happen, it would be a landmark moment for Bitcoin. The approval by the financial regulator of the world’s largest economy of this spot ETF would show that Bitcoin is, without any question, part of the global mainstream financial system.”
Spot ETFs invest directly in underlying assets, “typically stocks or bonds, at the current market price (spot price). They aim to replicate the performance of a specific index or asset class by holding a portfolio of the actual securities that make up the index.”
The Binance fiasco is another blow “to the crypto market following the FTX scandal last year. After a month-long trial, a jury recently convicted the FTX founder Sam Bankman-Fried of seven counts of fraud and conspiracy.”
The deVere CEO added:
“It appears that law enforcement and regulatory authorities worldwide are cracking down on executives and companies as digital currencies in all their forms – crypto and central bank digital currencies (CBDCs) – are set to become increasingly dominant in the international financial system. Greater regulatory scrutiny must be championed as digital currencies are set to play an ever-greater role. Cryptocurrencies must come into the regulatory tent and be held to the same standards as the rest of the financial system.”
He concludes:
“They are here to stay – and the market is only set to grow. There can be no doubt that regulation of the crypto ecosystem is required and, I believe, it should be a priority. The CZ news is a jaw-dropping blow in many ways, but this moment must now be used as a point of inflection to further shore-up the sector and instil trust and transparency by means of sensible, workable regulation as crypto continues its ascent.”
Moody’s experts have also weighed in on the development surrounding Binance’s settlement with the DoJ and its implications for the crypto industry, “the need for greater compliance and regulations, and the challenges ahead” for the new CEO, Richard Teng.
Keith Berry, General Manager, Financial Crime and Compliance at Moody’s Analytics:
“The Binance settlement with US regulators underscores the need for adequate compliance controls. Binance ignored their legal obligations from regulators and didn’t have proper compliance controls in place, thereby allowing money to flow to criminals. The rapidly growing yet relatively nascent crypto market has increasingly been targeted and implicated in financial crime due to its borderless nature, which creates the perception that it can be used to obfuscate illicit activities. However, the nature of crypto transactions is that they are traceable and transparent, due in part to the blockchain. Following the money should mean crime can be tackled successfully. And many crypto companies choose to operate with high standards of due diligence and know your customer checks. It’s a commitment to KYC, along with ongoing regulation and continuous automated compliance checks that are vital for companies when it comes to identifying true beneficial ownership and preventing money laundering.”
Yiannis Giokas, Senior Director – Digital Assets, Moody’s Analytics:
“The settlement agreement between US Authorities and Binance marks the end of an era. With digital currencies becoming more mainstream and institutional players entering the space, regulations and enforcement will become stricter to ensure compliance and consumer protection. Yesterday’s development marks the same inflection point that we saw earlier at the intersection of the .com and post-.com eras.”
Rajeev Bamra, SVP & Head – DeFi & Digital Assets Strategy, Moody’s Investors Service (the rating agency):
“Drawing on Richard Teng’s extensive regulatory background and experience, his new role in Binance represents an opportunity to move past mounting enforcement actions and chart a path towards stability and a fresh beginning. For Binance to achieve this, it will be crucial to establish a consistent and appropriate risk measurement approach, accompanied by robust supplementary disclosures. Additionally, embracing greater transparency and compliance with oversight bodies throughout the investigation is imperative. To enhance transparency, Binance must prioritize and comply with stringent KYC procedures on both ends of the value chain within respective jurisdictions. This measure ensures the validation of participants, strict adherence to AML protocols, and prevention of potential instances of tax evasion. By implementing these measures, Binance can provide investors with a clearer understanding of the exchange’s value, performance, and risk profile, as would be reflected in the audited financial statements.”
Andrew Carrier, part of the executive leadership team at Quant, comments:
“This is just the latest instalment in the welcome demise of the unregulated cryptocurrency market. Cases like those surrounding FTX and Binance have come to symbolise the downfall of the ‘crypto bro’ persona – as these high-profile figures are officially moved from cowboy to outright criminal. The good news is that much of the world now has regulation in place to tackle fraud and ineptitude in decentralised finance (DeFi). DeFi, and its underlying blockchain technology, does have a future, but it will mature and professionalise to the point it is culturally unrecognisable.”
He added:
“As the poorly designed elements of the crypto world are forced to either grow up or disappear, hopefully more people will turn their attention to the real gold here. That’s not crypto but the technology behind it: blockchain. With it, we can provide the world’s economies with a genuinely more valuable form of money: digital currencies that are regulated, backed by fiat deposits, and come with useful features like the ability to automate various types of transactions.”