Binance, the world’s largest cryptocurrency exchange, is projected to retain its position as the leading global exchange, despite reaching a settlement with the U.S. Department of Justice (DOJ). According to a research report by brokerage firm Bernstein, Binance experienced minimal outflows of less than $1 billion after the news of the settlement broke, indicating that customers did not panic significantly. Presently, Binance holds approximately $67 billion in customer funds under custody.
Binance’s Strong Reputation with Non-U.S. Customers
Analysts at Bernstein, led by Gautam Chhugani, highlighted that Binance’s reputation among retail non-U.S. customers remained strong throughout the crisis. Despite the settlement, Binance is expected to maintain its significance in non-U.S. markets. However, the report also anticipates increased competition from rivals such as Coinbase and new exchanges in regulated markets like Hong Kong and Singapore. Bernstein believes that Binance has sufficient funds to settle the $4.3 billion fine while sustaining healthy operations. The research report suggests that if Binance completely withdraws from the U.S. market, onshore and incumbent exchanges will continue to dominate the country. Additionally, it noted that asset managers, who have applied for regulated bitcoin exchange-traded funds (ETFs), are already collaborating with exchanges like Coinbase for prime broking and custody services.
Settlement Favorable for Regulated Bitcoin ETF Approval
The recent guilty plea made by Binance and its CEO Changpeng Zhao regarding criminal charges related to money laundering and violation of U.S. sanctions could be a significant step towards the approval of a regulated bitcoin ETF. The settlement reached with the U.S. Department of Justice allows the company to continue its operations, albeit with Zhao stepping down as CEO and Binance facing a substantial $4.3 billion fine. Under the terms of the settlement, Changpeng Zhao will personally pay $200 million in fines. Markus Thielen, the head of research at crypto services provider Matrixport, expressed a similar sentiment, stating that the plea deal is advantageous for CZ and the company, and Binance is likely to remain one of the top three exchanges in the near term. Thielen also suggested that the industry’s adherence to regulatory rules, demonstrated through the settlement, could enhance the chances of an approved spot bitcoin ETF. New Binance CEO Richard Teng has hinted at the exchange’s ability to pay the $4.3 billion fine imposed by the DOJ, further strengthening the belief in Binance’s financial stability.
“Binance will most likely be able to ‘pay full $4.3B DoJ fine with 0 crypto asset sales.'” – Connor Lango, Director of Business Development at Coinbase
According to Connor Lango, Director of Business Development at Coinbase, Binance will probably be capable of paying the full $4.3 billion fine to the DOJ without needing to sell any cryptocurrency assets. Lango discovered that even after removing Binance’s crypto holdings from their Proof of Reserves, the exchange still has $6.35 billion in total assets and $3.19 billion in stablecoins, indicating its strong financial position.
