Real threat to the crypto industry or just FUD?

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Binance, the world’s largest cryptocurrency exchange in terms of trading volume in recent years, has come under heavy scrutiny from various watchdogs in recent times.

Bearing in mind that this is one of the most important companies in the crypto industry to date, it is worth exploring what the impact of this threat might be on the industry-wide, or if it’s just a temporary FUD.

The growing list of regulators after Binance

Founded in 2017 as a result of a successful $ 15 million ICO, the Binance exchange quickly rose to fame by attracting massive market share in terms of cash trading volume and, later, derivatives. With the impressive growth, however, has caught the attention of global regulators, some of whom have issued warnings or formally taken action against the stock market.

The situation has recently worsened with the UK’s Financial Conduct Authority (FCA) leading the pack. The watchdog issued a warning to Binance Markets Limited and the Binance Group, saying they could not operate in the country.

Shortly after, however, the popular exchange responded by pointing out that “BML is a separate legal entity and does not offer any products or services through the Binance.com website.” Basically nothing had changed, the company said.

UK FCA

Despite the company’s assurance, however, more watchdogs have joined the trend. Japan was among the first, Singapore followed, and on the first day of July, the Cayman Islands joined the list – stating that “Binance is not allowed to operate in the islands.”

Just a day later, on July 2, 2021, the Thai SEC took it a step further. Instead of just issuing a warning, the regulator filed a criminal complaint against the exchange for operating an unlicensed digital asset business.

Real threat or just FUD?

Having several watch dogs on your trail seems to be a major obstacle. The stock market is under close scrutiny amid the 2020-2021 bull market which has seen prices across the space skyrocket by triple-digit percentages in a matter of months. However, such claims against one of the biggest companies in the industry could put an end to it all.

According to industry analyst Adam Cochran, not all of these developments look like coordinated attacks.

Instead, Cochran described a few more plausible scenarios. In the first, he points out that a larger nation might try to mount a case and “called the favor” of other regulators. On the other hand, there is collaboration to some extent to take on a criminal organization that used Binance.

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2) There is some collaboration here to build a case to take on a criminal organization that has used / exploit Binance internationally and exerting legal pressure on Binance is helping this case.

Adam Cochran (@adamscochran) July 2, 2021

Nonetheless, the analyst wrote that the rapid expansion of the exchange was his “only flaw”. From now on, the company will have to work with all the regulators because it has entered a gray area.

Jake Chervinsky, an influential lawyer specializing in the crypto industry, said mass watchdog cooperation is possible in this case, especially given Binance’s size and exposure.

Whether it is an actual threat or an FUD, the short history of crypto tells us that anything against the ultimate industry leader could have dire consequences for the whole of the world. ecosystem that is likely to severely affect the price of bitcoin in the short term.

Binance and MT.Gox ‘2014: One Exchange Takes It All

Binance, by far, is a leader in this industry: it has an investment arm, a launching pad for newly launched tokens, it is also the fourth largest cryptocurrency by market cap – Binance Coin (BNB) – with a current market capitalization of almost $ 50 billion at the time of this writing.

The Binance FIAT-to-crypto gateway is the starting point for many new traders and investors who are buying their very first cryptocurrencies. According to CoinGecko, daily traded volume is by far the lead among other spot exchanges. For example, on the day of this report, Coinbase – the second on the list, is only 10% of the daily volume traded on Binance Spot Exchange.

During its short history, the crypto industry has seen a similar (but different) development where one exchange controlled the vast majority of bitcoin and cryptocurrencies traded. It was in 2013 – 2014: a notable company received a heavy blow, which affected the entire market. Mount. Gox stands out.

The infamous attack on the platform, in which hackers accessed and stole over 700,000 bitcoins from the exchange’s wallets and 100,000 coins from the company, took place in early 2014. With current prices, these numbers are worth approximately $ 3.4 billion.

The effect of MT.Gox’s collapse was devastating. Predictably, prices in the crypto market fell immediately after the event. They also fell after other hacks, but ultimately Bitcoin and the industry prevailed, even though some of the exchanges no longer existed.

Looking at the price chart, BTC recorded its previous November 2013 high of over $ 1,150, however, after MT.Gox collapsed, Bitcoin plunged below $ 400 just three months later.

Of course, things have changed since then. Although MT.Gox and Binance both control the majority of crypto trading markets, today there are legitimate alternatives, especially for FIAT – crypto gateways. To name a few, there are regulated US-based exchanges Kraken and Coinbase, as well as EU-based Bitstamp.

On the flip side, altcoin markets could face huge problems in the event that legal action is taken against Binance, due to the fact that Binance specializes in trading markets for altcoins (crypto-to-crypto ).

If history is any indicator, the crypto space is likely to persist for the medium to long term, even if the pressure on Binance is so severe that the exchange succumbs to regulatory scrutiny and there could be an immediate price effect. short term.

Binance CEO Chainpeng Zhao. Source: MediumCZ: Ignore FUD

Binance CEO Changpeng Zhao (CZ) recently tweeted to “ignore FUD” in response to the British FCA’s allegations. He later sent an open letter to the community in which he compared current developments in the cryptocurrency market with what happened over a century ago when cars began to emerge:

The adoption and development of crypto has many parallels with that of the car. When the car was first invented, there were no traffic laws, traffic lights, or even seat belts. Laws and guidelines were developed as cars drove down the road.

It is frameworks and laws that we take for granted today that allow this powerful technology to be used widely and safely. Crypto is similar in that it can be accessible to anyone, but frameworks are needed to prevent abuse and bad actors.

Binance spokesperson: Didn’t always get it all

CryptoPotato has also reached out to Binance for a response to the above claims.

“Binance’s goal has always been to put users first and protect their interests, whether through SAFE or in our work to help law enforcement clean up the industry by helping weed out bad actors. ” as Binance spokesperson told us.

Additionally, the spokesperson described the exchange’s efforts to improve its compliance team, including the most recent hiring. As previously reported, eToro’s former Jonathan Farnell has joined as the new Chief Compliance Officer.

Additionally, the spokesperson admitted that Binance may have made a mistake along the way, but claimed the company is doing its best to improve.

We grew up very quickly and didn’t always understand everything, but we are learning and improving every day. We continue to increase investments in our compliance program, work with our third-party compliance partners, and work to improve our proprietary KYC and AML technology to further strengthen our compliance standards.

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