In a research report published on Wednesday, Wall Street’s premier broker Bernstein revealed how it believed Binance to retain its international dominance in the aftermath of its recent US settlement.
The crypto exchange, which is the world’s largest, has adequate funds to settle the $4.3billion fine while maintaining healthy operations, said its analysts led by Gautam Chhugani. The fine is said to be one of the largest penalties ever obtained from a corporate defendant.
Even though Binance experienced minor outflows of less than $1bn following the developments in the US, there was no major panic from customers. It continues to remain the dominant crypto exchange internationally with about $67bn of customer funds under custody. According to Chhugani, Binance’s reputation with retail non-US customers has “remained strong through the crisis.”
As per court filings that were unsealed on Tuesday, Binance allegedly failed to maintain a proper anti-money laundering program, operating an unlicensed money-transmitting business and violating sanctions law.
Attorney General, Merrick Garland, commented on this saying: “Binance employees knew and discussed that the company was serving thousands of users in sanctioned countries, and they knew that facilitating transactions between U.S. users and users in sanctioned countries would be in violation of U.S. law. But they did it anyway.”
Its founder Changpeng “CZ” Zhao also pleaded guilty to charges that he personally faced and announced his decision to step down from the top CEO position, admitting that he had made mistakes. Following this, former Abu Dhabi regulator, Richard Teng, was appointed the new CEO.
In a post made on X (formerly Twitter), Teng said: “My focus will be on: 1) reassuring users that they can remain confident in the financial strength, security and safety of the company 2) collaborating with regulators to uphold high standards globally that foster innovation while providing important consumer protections 3) working with partners to drive growth and adoption of Web3.”
While Binance is expected to remain a “material entity in non-US markets”, Bernstein also anticipates increased competition from some of its rival exchanges like Coinbase (COIN) and the other new exchanges in regulated markets such as Hong Kong and Singapore.
However, the latest turn of events have removed what Bernstein believes to be the final hurdle before the approval of a spot Bitcoin exchange-traded fund (ETF). The report noted how asset managers who have filed ETF applications are already working with exchanges such as Coinbase for prime broking and custody. Adding on, they said: “In our view, this is the final straw before the establishment feels comfortable to approve a regulated Bitcoin ETF.”
A similar stance of opinion was also expressed by crypto services provider Matrixport. According to its analysts, while the plea deal did not include the Securities and Exchange Commission (SEC), it is still a very favourable outcome for CZ and the company itself. The firm would therefore likely remain a top-three exchange in the near term, said the report. Referring to traditional finance, its head of research, Markus Thielen wrote: “With this plea deal, the expectations for a spot Bitcoin ETF might have increased to 100% as the industry will be forced to follow the rules that TradFi firms must follow.”
