This week I thought I would take a good look at the question that has been bothering me all week as the Binance $4 billion fine news hit the headline. Can Binance afford this fine, and what does the CZ case mean for Binance?
On the surface, this is another sign that US regulators are not taking their foot off crypto’s neck, further evidenced by the SEC accusing crypto exchange Kraken of raising risks for customers by violating key rules.
Source: Twitter.com
The choice to pursue a settlement rather than a trial may be a concern for the exchange’s users and the extent of its entrenchment in the crypto industry. Hundreds of thousands of regular people would be caught in the fallout if Binance were to collapse under the weight of a conviction.
However, some industry figures are actually bullish about this recent regulatory fine, and simply state this means with the payment out the way this is the end of Binance's regulatory issues.
Binance resolving the case eliminates “potential systemic risk emanating from a hypothetical Binance collapse,” JPMorgan also said.
Traditional financial institutions like BlackRock, Grayscale and Fidelity have applied for spot Bitcoin exchange-traded funds, a signal for many that crypto is either maturing or being taken over by the very established organizations some crypto natives want to avoid.
Source: Bloomberg.com
Binance’s head of regional markets, Richard Teng will step up as CEO. This quick promotion, which was already in the public consciousness, has calmed the storm somewhat.
Binance, at the same time was required to pull out of several jurisdictions, although it has in some ways grown over the past year while the rest of the industry retracted.
The alleged crimes are sweeping, and the penalty is massive. Binance will pay a $4.3 billion fine for violating money transmission laws and U.S. sanctions.
Withdrawals over the past 7-days have reached up to 1.7 billion USD, according to DefiLlama’s centralized exchange.
Source: DefiLlama.com
Despite the hefty fine, Binance is expected to pay without selling any crypto assets, thanks to its $6.35B in corporate crypto reserves.
An attestation of an exchange’s holdings shows the exchange holds $76.8 billion worth of crypto assets alone.
This should halt any concerns about the company selling customer’s crypto to pay its fines.
Binance appears to be overcollateralized for many of the largest assets on its books, like bitcoin (BTC), ether (ETH), tether (USDT), and others, meaning Binance’s net balances are more than it owes customers.
The exact details of Binance’s finances are a closely held secret. The company generated at least $20 billion of revenue during the crypto boom in 2021, according to a Bloomberg analysis last year of its trading volume and fees.
Also, Binance exchange boasts over 150 million users, and thousands of employees. The exchange also runs divisions in nearly every crypto vertical, maintains one of the most used DeFi chains, and makes moves into AI.
Overall, it does appear that Binance can afford to pay the fine, despite some reports this week to the contrary.
Source: Tradingview.com
My charts and many on-chain indicators are still pointing to one more decent-sized drop in crypto before a much larger rally happens, so it could be that the Binance saga has a few surprises yet.
Of course, if we see more regulatory action against Binance and other exchanges then it's likely to place more pressure on cryptos.
