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Binance at a crossroads!

Wed 20 Dec 2023 ▪ 3 min read ▪ by Luc Jose A.

Getting informed ▪ Centralized Exchange (CEX)

Recently, Binance has reached an agreement valued at over $4 billion to drop investigations conducted against it by the U.S. Department of Justice (DOJ). An almost identical deal, again involving Changpeng Zhao, the former CEO of Binance, was concluded according to the latest news. This time, with the Commodity Futures Trading Commission (CFTC). The deal has implications.

An Agreement with the CFTC Obliges Binance to Take Actions

According to recent information, there has been a development in the legal case that pits crypto exchange Binance against the Commodity Futures Trading Commission (CFTC). The two parties have reached an agreement that imposes severe sanctions on the exchange, as well as on its former leader, Changpeng Zhao.

Therefore, Binance will have to pay a fine of $2.7 billion. This sum includes the restitution of $1.35 billion in transaction fees deemed ill-gotten. The remaining $1.35 billion represents a penalty to be paid to the CFTC. As for Changpeng Zhao, he incurred a civil fine of $150 million.

These sanctions come to punish the former CEO’s decisions to launch Binance into the derivatives market, in contempt of U.S. laws. This development can also be interpreted as additional pressure for Binance to rigorously comply with regulatory rules if it wants to continue to exist.

U.S. justice validates the agreement between Binance and the CFTC

What Are the Consequences for Binance?

The question is worth asking, especially given the financial situation of Binance, which has continued to worsen in recent months. This has had direct consequences on the market share of the firm, which has also particularly eroded.

Although still the market leader in exchanges with just over 50% market share, Binance is at risk of losing its position. A spot that could be claimed by competing exchanges such as Coinbase, among others.

In the current state of affairs, it is not possible to say precisely what the payment of a $2.7 billion fine represents for Binance. A lesser evil, one is tempted to say compared to a long and costly trial, and to a credibility somewhat more tarnished!

However, added to the $4.3 billion recently imposed by the DOJ, one can imagine that it cannot be without consequences for Binance. What is certain is that this development lends a bit more weight to the projections seeing the crypto exchange lose its leadership in 2024.

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Luc Jose A.

Diplômé de Sciences Po Toulouse et titulaire d'une certification consultant blockchain délivrée par Alyra, j'ai rejoint l'aventure Cointribune en 2019. Convaincu du potentiel de la blockchain pour transformer de nombreux secteurs de l'économie, j'ai pris l'engagement de sensibiliser et d'informer le grand public sur cet écosystème en constante évolution. Mon objectif est de permettre à chacun de mieux comprendre la blockchain et de saisir les opportunités qu'elle offre. Je m'efforce chaque jour de fournir une analyse objective de l'actualité, de décrypter les tendances du marché, de relayer les dernières innovations technologiques et de mettre en perspective les enjeux économiques et sociétaux de cette révolution en marche.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.