In a scenario where the binance “go FTX”, that is, break and be judged in American justice as well as the FTX in November 2022, the scenario could be disastrous. But only in the short and medium term, according to Paulo Camargo, crypto asset analyst at Empiricus.
The tight regulation on top of the binance raised concerns about liquidity in the crypto marketwhich is already at a ten-month low following the collapse of Silvergate and Signature Bank.
A considerable volume of withdrawals, around US$ 2 billion, have left the exchange since Monday. Even so, the Bitcoin (BTC) gains 5% in price this Wednesday (29).
Bitcoin’s market depth indicates that the asset is at its lowest level of liquidity in 10 months, even lower than after the FTX collapse in November, according to data provider Kaiko.
The market depth for the two main trading pairs – bitcoin-dollar and bitcoin-tether – is 5,600 bitcoins, equivalent to around US$155 million, according to Kaiko.
What’s going on with Binance?
A binance was sued by the Commodity Futures Trading Commission (CFTC). The agency, which seeks to regulate the derivatives market, filed the lawsuit this Monday (27).
According to the document, there are seven charges against the Binance Global. In addition to Binance itself, they were also accused of breaking federal laws in favor of the profitability of the exchange Changpeng Zhao (“CZ”), the CEO, and Samuel Lim, the company’s former director of compliance.
The regulator claims that the brokerage has, since its creation, avoided the regulationand that, although he says publicly that he is moving away from the United States, in reality, he is getting closer and closer to the country.
In addition to the irregular offer of derivatives, the accusations also involve failures in supervision and implementation of mechanisms to combat money laundering.
What might be coming?
For Camargo, Empiricuswhat the market cryptocurrencies is facing is unprecedented compared to previous events. However, he says there is no reason to panic.
“Prices may fall in the short term, even if that is not what is happening”, he says. In the long term, he claims that the crypto market will not even remember the episode.
“Prices are even more resilient these last few days. That’s pretty positive,” she explains.
Camargo comments that the CFTC has presented what seems to be very solid evidence against the brokerage, and suggests that investors, as a guarantee, protect themselves through cold custody portfolios of cryptocurrencies.
“It has always been recommended, regardless of whether you have money in binance, or another brokerage, the recommendation for those who have a considerable amount of crypto assets is to withdraw and carry out their own custody. Preferably on a hardwallet [carteira fria]but a software wallet [carteira instalada no computador, ou celular] It helps a lot,” he says.
The path will be volatile in prices as the process unfolds, says the analyst. Among the possible negative impacts are scenarios such as the binance being ordered to pay a large fine, the CZ being arrested or the brokerage being banned from operating in the United States. Camargo dismisses the total closure of activities.
“A binance is the largest broker in terms of trading volume on the market. It even gained market share after the implosion of FTX. I don’t think this process will make it cease to exist, I think it’s an unlikely scenario. Therefore, I do not believe that we will lose trading volume with this impact”, he evaluates.
Binance is not the first; regulators tighten the cryptocurrency market in 2023
The analyst points out that this year has been permeated by activity by regulators, especially from the United States. “I imagine it will continue to be that way, so volatility could still continue in the market,” he says.
“We at Empiricus are very much in favor of regulation. Of course, it is a slow process that still needs to go through a lot of discussions until it evolves into a point of view that makes sense, ”he says.
For him, the right regulation can be essential, both from the point of view of protecting investors and also to punish malicious actors in the market.
A recent example, in which the regulator will judge and understand the applicable punishments, is that of Do Kwon, founder of the Earth ecosystem (LUNA) that collapsed last year.
Kwon was detained last week in Montenegro, and today the authorities announced to the press that both the United States and South Korea have already requested the extradition of the financial crime suspect.
What can be taken positively from all this, according to Camargo, is the discussion being brought up constantly between regulatory bodies. “Cryptocurrency regulation has never been more discussed before. It is a sign that the market has left a niche and is growing”, he says.
In a press release, Binance’s advisory issued the following statement:
“The complaint filed by the CFTC is unexpected and disappointing as we have worked collaboratively with the CFTC for over two years. However, we intend to continue to collaborate with regulators in the US and around the world. The best way forward is to protect our users and collaborate with regulators to develop a clear and thoughtful regulatory regime.
We’ve made significant investments over the past two years to ensure that we don’t have active US users on our platform. During this time, we have expanded our compliance team from approximately 100 people to approximately 750 employees in key and compliance support roles today, including nearly 80 employees with previous law enforcement or regulatory experience and approximately 260 employees with professional compliance certifications. .
We also spend $80,000,000 on external partners, including KYC (Know your customer) service providers, transaction monitoring, market surveillance and investigative tools that support our compliance programs.
Consistent with regulatory expectations around the world, we implement a robust “three lines of defense” approach to risk and compliance, which includes, but is not limited to:
- Require mandatory KYC for all users worldwide;
- Maintain country locks for anyone residing in the US;
- Block anyone identified as a US citizen, regardless of the country they are living in;
- Blocking for any device using a US cellular provider;
- Block logins from any US IP address;
- Avoid US bank deposits and withdrawals to credit cards.”
Source: Moneytimes
I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.
