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News/Binance's Regulatory Hurdles Escalate: Latest Impact on Crypto Giant

Binance's Regulatory Hurdles Escalate: Latest Impact on Crypto Giant

Van Thanh Le

Nov 30 2023

6 months ago4 minutes read
Cute chibi cubic-styled robot engaged in a virtual reality crypto trading game

Philippines Security Regulator Warns Binance for Unlicensed Operation

The Philippines Securities and Exchange Commission (SEC) warns that Binance is operating without a license, risking access blockage in the country. Binance's activities, including selling or offering securities and active promotion on social media, breach local financial laws.

Those promoting Binance could face criminal charges, with penalties up to 5 million Philippine Pesos (about $90,000) or a maximum of 21 years in prison. The SEC seeks the National Telecommunications Commission's aid to block Binance and has directed Google and Meta to stop local Binance ads.

If the block proceeds, Filipino Binance users have three months to liquidate and withdraw their assets. Binance acknowledges these issues, stating a commitment to align with regulations and resolve the SEC's concerns.

Binance's Thailand Challenge Post DoJ

Binance's expansion into Thailand faces uncertainty as its 2024-scheduled subsidiary, Gulf Binance, attracts intense scrutiny. This follows legal issues involving founder Changpeng Zhao and the US Department of Justice, where Zhao settled charges related to anti-money laundering and sanctions law violations.

Whimsical steampunk marketplace with anthropomorphic animals trading cryptocurrencies, set against a backdrop of clockwork structures and airships.webp

Despite these challenges, Gulf Binance, backed by Thai billionaire Sarath Ratanavadi, aims to provide regulated digital asset services. It has secured licenses from Thailand's Ministry of Finance and approval from the Securities and Exchange Commission. 

Ratanavadi also expresses confidence in the exchange's credibility despite regulatory hurdles. However, regulatory concerns cast doubt on its launch timeline.

Cristiano Ronaldo Faces Lawsuit Over Alleged Promotion of Unregistered Securities on Binance

Cristiano Ronaldo is currently facing a $1 billion class action lawsuit for his role in promoting unregistered securities with Binance. This legal action stems from Ronaldo's "sustained and aggressive" campaign for the crypto platform since 2022, involving his first NFT collection launch. According to the authorities, these promotions were “deceptive and unlawful.”

The lawsuit targets Ronaldo for urging his vast social media audience, which has millions of followers, to invest with Binance, purportedly aiding the platform's alleged deceptive practices. The lawsuit cites Binance's illegal operations and claims over 100 million users were exposed to Ronaldo’s advertisements. 

Whimsical digital illustration of a dreamlike landscape with a giant floating piggy bank and a colorful miniature city under a kaleidoscopic sky.webp

Binance, meanwhile, has settled a recent case with the U.S. Department of Justice, paying $4.3 billion over accusations of money laundering and fraud. Additionally, Binance's ex-CEO Changpeng Zhao paid a $50 million fine for breaching the U.S. Bank Secrecy Act.

Ronaldo, now based in Saudi Arabia, must respond to the lawsuit within 21 days, as per the court summons served to him. He is reportedly considering settling the case for $750,000 to avoid a public trial, similar to other public figures in similar situations.  

Binance to Cease BUSD Stablecoin Support in December

Binance is set to stop supporting BUSD products on December 15, 2023. Users with BUSD are advised to withdraw or convert their holdings before this deadline. From December 31, withdrawals of BUSD will be disabled, with remaining balances automatically converted to First Digital USD (FDUSD).

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Previously, Binance planned to phase out BUSD by February 2024, beginning with halting its borrowing and lending services in October. This move aligns with earlier SEC scrutiny over BUSD, potentially being an unregistered security, leading to its issuance halt by the New York Department of Financial Services.

Following a legal battle with U.S. authorities, former CEO Changpeng Zhao was replaced by Richard Teng. The market cap of BUSD has fallen drastically, over 92% in the last 12 months, signaling significant shifts in the stablecoin market.

Crypto Markets Remain Unaffected by DOJ Settlement; Binance Stays Strong: K33 Research

K33 Research highlights the resilience of major cryptocurrencies like Bitcoin and Ether despite a $4.3 billion DOJ settlement, with both closing the week with flat returns. 

chart.webp

Binance, although facing a $1 billion outflow post-settlement and a drop in market share from 70% to below 45%, remains a key player in the crypto market. Its dominance is evident with $66.917 billion in digital assets held, far surpassing OKX and Bitfinex, with $12.413 billion and $11.746 billion, respectively.

The settlement's impact on Binance, primarily due to illegal U.S. operations, contrasts with the FTX collapse as it didn't affect customer funds. Binance's BNB token fell by 10% after the breaking news, while Uniswap's UNI token rose by 20%, benefitting from its decentralized nature.

bnb performance.webp

In the derivatives market, Binance's share decreased from 32% to 26% in 2023, with CME Bitcoin futures premiums moderating and a 6% reduction in open interest. Institutional traders on the CME showed high long exposure, with premiums for Bitcoin and Ether near all-time highs.

Richard Teng, Binance's new CEO, commits to maintaining the stability of the core team, ensuring continuity within the organization despite these challenges.

SEC Investigating Binance.US for Possible Fraud Despite Guilty Pleas

As per WSJ, the U.S. Securities and Exchange Commission (SEC) is investigating Binance's U.S. branch and former CEO, Changpeng Zhao, for fraud, despite their prior guilty pleas to the Department of Justice (DOJ) on different charges. This inquiry is to assess if they retain unauthorized control over Binance.US' crypto assets.

Earlier, the SEC accused Binance of selling illegal securities. Post these allegations, Zhao resigned as CEO after admitting to weak anti-money laundering protocols. Binance settled with the DOJ for $4.3 billion, although the accusations did not involve customer fund control.

Enchanted forest scene in digital art style with cryptocurrency-symbol trees and ethereal creatures around a shimmering crypto portal.webp

Binance.US lawyers have sought to end the SEC investigation, highlighting Zhao's admissions. The U.S. Magistrate Judge is evaluating this proposal. Meanwhile, Binance faces a financial downturn due to the lawsuit, with a 90% asset reduction and a 50% drop in monthly users. Their attorney claims there's no proof of asset misuse.

CZ has hired Matthew Diggs, a former federal prosecutor and partner at Davis Wright Tremaine LLP, for legal representation. Diggs, with a 15-year career in white-collar crimes, is aiding CZ, who's on a $175 million bond and faces potential 10-year imprisonment charges. Diggs' diverse experience in high-stakes white-collar cases is a strategic choice for CZ in navigating regulatory challenges.

Interestingly, Binance reportedly held a dinner in September for top traders, discussing the $4 billion settlement with the DOJ. According to Bloomberg, VIP guests were convinced Binance would pay that sum, possible due to company representatives at the dinner. Former CEO Changpeng Zhao was absent; new CEO Richard Teng was there.

Conclusion

Binance's tumultuous 2023 highlights the critical importance of regulatory compliance in the crypto industry. Amid legal challenges and CEO changes, the platform remains resilient but faces significant hurdles. This situation underscores the delicate balance between innovation and adherence to financial laws, a crucial lesson for all in the crypto sector.

FAQs

1. What are the recent legal challenges faced by Binance in the Philippines?  

Binance has been warned by the Philippines Securities and Exchange Commission for operating without a license, potentially leading to access blockage in the country. Those promoting Binance could face criminal charges, with penalties including a fine of up to 5 million Philippine Pesos or a maximum of 21 years in prison.

2. How does Binance's Thailand expansion look in 2023?  

Binance's Thailand expansion, through its subsidiary Gulf Binance, is under intense scrutiny due to legal issues involving founder Changpeng Zhao. Despite backing from Thai billionaire Sarath Ratanavadi and securing necessary licenses, regulatory concerns cast doubt on its launch timeline.

3. What legal issues is Cristiano Ronaldo facing related to Binance?  

Cristiano Ronaldo is sued for promoting unregistered securities with Binance, specifically involving his NFT collection launch since 2022. The lawsuit accuses him of aiding Binance's alleged deceptive practices, and he must respond to the court summons within 21 days.

4. What changes are happening with Binance's support for BUSD stablecoin?  

Binance will cease supporting BUSD products on December 15, 2023, with users advised to withdraw or convert their holdings before this deadline. After December 31, remaining BUSD balances will be converted to First Digital USD (FDUSD).

5. How has Binance been affected by the DOJ settlement?  

Following a $4.3 billion DOJ settlement for illegal U.S. operations, Binance experienced a $1 billion outflow and a reduction in market share. However, it still holds a significant position in the crypto market with $66.917 billion in digital assets.

This article has been refined and enhanced by ChatGPT.

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