Good day everyone,

I hope you are all well and having excellent day, welcome to CryptoGod-1’s blog on all things crypto. Today I will be looking at what I consider to be quite a sore topic, and one which could have a huge impact on the future of crypto. I am of course talking about the worlds largest and most popular exchange, Binance, and how over the past year or so the exchange has been on a downwards spiral which could have far reaching consequences.

Tough Year for Binance

Since the collapse of FTX in November 2023 the cryptocurrency world has never quite felt the same. The scandals, the scams, the shenanigans, the pure and total level of FUD in the space has been a new experience for most. Crypto Winter and a bear market to test the nerves of even the most fool hardy crypto traders has certainly made its mark on the space, but perhaps there is something which has been a frequent occurrence but has not dominated attention in the way it should have.

I am of course talking about Binance, and the mixed bag of issues which have faced the cryptocurrency exchange since November / December 2022. While they have been in an out of the news with a variety of events, some good but most bad, it has never really captured the headlines in the same hard hitting way as FTX or Terra did. Possibly this is because those two caused market crashes, while Binance is still working away under what is considered normal conditions. Is this the calm before the storm, is Binance really in a spiral of destruction? Below I will list out and look at the major events which could spell long term disaster for the exchange.

November 2022

• On the 2nd of November, while Changpeng Zhao was giving a speech about volatility in the marker, the news broke of the Alameda Research balance sheet.
• On the 6th of November, Binance and Changpeng Zhao announced they would be liquidating all its holding of FTT tokens. This was based on revelations that have come to light.
• FTX hit back on the 7th of November via Sam Bankman-Fried, claiming a competitor (Binance) was trying to go after them with false rumours.
• On Tuesday the 8th Binance announced they would buy FTX to help save it, but the following day the plug was pulled on the deal. Rumours resurfaced of a hole in FTX’s balance sheet and Binance said it could no longer push ahead with the deal. By the 11th of November, FTX was filing for bankruptcy and the rest is history.
• Binance became the main go to cryptocurrency exchange with FTX having been one of their closest competitors. 

December 2022

• Over $10 billion is withdrawn from Binance, leading to the temporary suspension of Spot BNB Borrow, withdrawals of ERC USDC, and rumours surface of an impending charge(s) from the Department of Justice (DOJ).
• The proof of reserves auditors for Binance, Mazar, decides to suspend all crypto work, including Binance.
• BinanceUS is forced to temporarily suspend the withdrawals of USDC and USDT.

January 2023

• The stable coin pegged BUSD apparently had more than a $1 Billion collateral hole, but the company moved to allay fears and ensured it was now fixed.

February 2023

• The New York Department of Financial Services (NYDFS) orders Paxos to stop minting the BUSD coin for Binance, this being due to several unresolved issues related to Paxos' oversight of its relationship with Binance in regard to Paxos-issued BUSD. The NYDFS instigated an investigation into Paxos over the issuance of the token.
• The SEC alleged that BUSD is an unregistered security, and therefore announced their plans to sue Paxos over the BUSD fiasco.
• Changpeng Zhao, the CEO of Binance, announced that Binance was distanced from BUSD, and Paxos was the issuer whom they dealt with. He went on to note “With BUSD gone, BUSD slowly winding down over time, we will will continue to work with more stablecoin issuers or creators.”
• Coinbase announces they will be suspending the trading of Binance USD (BUSD) starting the 13th of March 2023, noting that the token does not meet their listing standards.
• Binance announces the suspension of all USD bank transfers after it lost its banking partner.
• The Derivatives section of Binance Australia notified user they needed to become classified as a “wholesale investor” if they wished to continue trading, with their positions to be closed. Binance noted their actions were in line with local regulations in Australia.
• An unexplained transfer of roughly $400 million from Binance US to a trading firm managed by CEO Changpeng Zhao. The money was sent in a series of transactions in 2021 from an account controlled by Binance.US to trading firm Merit Peak. 

March 2023

• Both Binance and its CEO Changpeng Zhao are sued by the Commodity Futures and Trading Commission (CFTC) under violation of federal law to solicit U.S. users for millions in revenue, while also taking steps to purposefully obscure where the exchange’s subsidiaries were located.

April 2023

• After BinanceUS is finally allowed to continue with its acquisition of Voyager Digital by the United States Government, the exchange decides not to pursue the deal.

May 2023

• Binance completely leaves the Canadian market, withdrawing all its services.
• Reuters makes a claim that Binance commingled customer funds with company revenue in 2020 and 2021, in breach of U.S. financial rules. Binance hit back and denied the allegations, calling the report "weak". They went on to say that there was no commingling of funds, adding that it was "100 percent corporate funds."
• The US Department of Justice opened an investigation into any possible violations of U.S. sanctions on Russia by Binance.
• There is a brief pause in Bitcoin withdrawals from Binance, noting its decision was based on congestion issues impacting Bitcoin’s network from memepool congestion.
• Rumours emerge of a potential 20% layoff in staffing numbers at Binance. The company respond by stating there were "No 20% staff cut" but instead it was a mere saying goodbye to people who are not strong fits with the company.
• Binance withdraws all its assets from staking pools, which leads to prices heavily deviating from one exchange to another as liquidity falters.

June 2023

• The SEC officially charges Binance and Changpeng Zhao with 13 charges, including making use of market-making companies that they controlled to inflate trading prices and profit off of their customers, engaging in “wash trading” to prop up the market, and alleging both comingled billions of dollars worth of user funds and sent them to a European company controlled by Zhao.
• A report in Bloomberg claims Changpeng Zhao may be replaced by Richard Teng.
• The SEC seek a temporary restraining order against Binance.US Assets, wanting them frozen. The judge denies the request, instead requiring the SEC and Binance to compromise on securing customer assets.
• Binance goes under preliminary investigation for illegal canvassing of clients and money-laundering breaches in France. The prosecutor's office noted: The investigation is about "the unauthorised practice of the profession of virtual assets service provider" and "aggravated money-laundering."
• Binance is forced to stop operating in the Netherlands and Belgium due to failing to obtain a virtual asset service provider license from the Central Banks. They were allegedly committing acts which are liable to constitute a criminal offense.
• Binance announces the large transfer of Bitcoin, resulting in over $3 billion being moved, including a massive transfer of 117,000 BTC from one Binance cold wallet address to another. It was also noted that 130,000 BTC were depleted from the exchange’s cold wallet. The company announced this was due to moving the crypto to new cold wallets for security.
• Changpeng Zhao and Binance decide to hire George Cannellos, Former Chief of SEC Major Crimes United, to represent them as their criminal defence attorney against the US allegations of operating an illegal securities exchange.

July 2023

• Three senior officials were reported to have quit Binance in response to Changpeng Zhao's handling of the ongoing investigation by the U.S. Department of Justice. The three who left were Binance General Counsel Han Ng, Chief Strategy Officer Patrick Hillmann, and Senior Vice President for Compliance Steven Christie, along with Binance’s Global Vice President of Marketing and Communications Steve Milton.
• The application for a license from German financial regulator BaFin is withdrawn by Binance, as the company is aware it will not be approved while Changpeng Zhao is in charge. Binance noted they still intend to apply for appropriate licensing in Germany, but need to ensure their submission accurately reflects the changes in the global market and regulations.
• Layoff's mounting to around 1,000 employees globally is reported due to Binance's ongoing legal investigation from the U.S. Securities and Exchange Commission (SEC) and other regulatory challenges. Binance then decided to reduce employee benefits as a response to recent market downturns. These included mobile-phone and fitness reimbursements, as well as work-from-home expenses.
• Crypto saw massive drops in June and July, and Binance is noticed moving 7.5 Billion BNB coins. The company claims it is spreading around the coins to multiple addresses for security purposes.

August 2023

• Binance decides to shut down its buy-and-sell service Binance Connect, formerly known as Bifinity, a year after its launch. Binance Connect allowed merchants to accept payments in crypto.
• Traditional financial institution MasterCard end their Binance Card Partnership, which allowed users in Latin America and the Middle East to purchase goods with their crypto. Visa ended a similar tie for Europe in July 2023.
• The London-based credit card processing company Checkout.com drops Binance, its once-largest customer. The end of service came after Checkout CEO Guillaume Pousaz terminated the company’s relationship, citing “reports of regulators actions and orders in relevant jurisdictions” and “inquiries from partners.”
• The Wall Street Journal claims that Binance is facing legal risks as they are apparently committing massive US Sanctions Violations with Russian Banks. Binance denies the claims, but admits the business is evaluating its entire plan over their business actions in Russia, and may consider leaving the market.
• The Head of Asia-Pacific, Leon Foong, announces his decision to leave Binance, as regulatory scrutiny intensifies surrounding the world’s largest cryptocurrency exchange.
• BAM Management US Holdings Inc., which is behind Binance US, had a Consent Order to submit a verified written accounting to the United States Securities and Exchange Commission’s (SEC) lawsuit, but failed to meet the required deadline to produce the financial records.

September 2023

• The Global Head of Product for Binance announces they are quitting, as Mayur Kamat became the latest senior executive to leave the world’s biggest crypto exchange.
• CZ announces Binance are fully solvent with no liquidity issues, and assures its balance sheet and employee retention remain robust despite the recent market uncertainty.
• More executives leave Binance, this time two involved in the companies business in Russia and Eastern Europe. Gleb Kostarev, the firm’s Regional Head of Eastern Europe, the Commonwealth of Independent States, Turkey, Australia and New Zealand, announced he was leaving. Helen Hai, who was overseeing Binance’s global fiat business, has also left.
• Binance.US CEO Brian Shroder leaves the company, while one-third of its workforce is also eliminated. The company notes the actions have ensured they have a minimum of seven years of financial runway remaining to enable the continuation of operations.
• Binance sees its Bitcoin trading volume plunge by 57% due to regulatory pressure, while the likes of Coinbase have their trading volume increasing as alternative exchanges begin to benefit from the disillusion surrounding Binance.

Incoming Disaster?

Looking at the lengthy list of events over the past year or so, it is clear Binance have been centre of attention in the crypto space. While that is understandable for the world’s largest cryptocurrency exchange, there have been plenty of negatives in the headlines. When considering the staffing layoff’s and top executives leaving their posts, rumours and rumblings are bound to emerge. Changpeng Zhao is adamant all is fine with the exchange, with no liquidity issues and a robust balance sheet.

Some would say it all sounds a little too familiar, with FTX having only collapsed last November after stating all was good, all was fine. Binance is of course a much larger exchange, being the world’s self proclaimed largest exchange, and with that comes the added levels of responsibility and liquidity. While many will argue it is impossible and a true disaster if Binance was to crash or be forced into bankruptcy similar to FTX, it is a very real possibility. As consumers we can only go on the information presented to us, and assess the situation for ourselves. With over $5.7 billion in daily trading volume, Binance has become one of, if not the, most important piece of the modern day crypto puzzle.

A survey from BTC Peers, involving 1,273 crypto traders internationally, has shown that 45% of the traders believe there’s a credible possibility of Binance’s collapse, while 55% of the voters believe that Binance’s market dominance will continue for the foreseeable future. In terms of a collapse of Binance, 60% believe that it would cause market crisis and volatility similar, if not worse, than that of the FTX collapse. The remaining 40% believe it would spur competition and innovation. 

According to data from Santiment, the social volume for the term “Binance collapse” skyrocketed on June 6 when the BTC price fell below the $26,000 mark. While the talk of a Binance collapse has somewhat subsided since then. there is always concern and fear around the corner. With over $63.1 billion in digital assets trading on Binance, and an estimated 555,502 Bitcoin on the exchange worth about $13.3 billion or so, a crash would certainly push the market to the limits. For context, FTX was missing assets worth $8 billion or so at the time of its collapse.

Consequences

If Binance were to find itself in difficulty and ended up collapsing, the impact on the wider crypto market could be astronomical. Given the sheer levels of trading volume on Binance, if it were to collapse there is a very real likelihood that Bitcoin would drop below the $10,000 price point, at least temporarily. Confidence would be at an all time low, and the market sentiment would be very bleak. A total of 70% of the survey respondents feel the same, and that a collapse of Binance would set the crypto market on fire. The impact would go as far as price discovery and arbitrage, with panic selling becoming rife. The impact on the likes of USDT could see many traders close positions and convert their holdings back to fiat currency, and in doing so crush Bitcoin prices.

The negative publicity would certainly deter new adopters and fuel doubts over Bitcoin's longevity as a safe asset. Regulatory bodies would be quick to seize the opportunity to enforce their rule on the space, and suddenly crypto could be as centralised as any state asset or body. Binance may no longer be considered totally invincible, but getting to the top always meaning the fall down is a lot harder. Some could see the actions of Binance when FTX was collapsing as just cause for similar to happen to Changpeng Zhao's exchange. To be the best Binance will need to continue proving they are the best, otherwise the cause of their collapse, and the impact of their collapse, could be monumental. 

However, 30% think even if the exchange collapsed there is no need to fear, no need to panic. Afterall, we have all been through this before, and crypto / Bitcoin are still are resilient as ever. From the recent FTX disaster all the way back to Mt. Gox, the market goes on. The community and determination of the crypto space would absorb the shocks of a Binance failure, similar to those in the past. Given Bitcoin's decentralized nature, there is no dependence on one single exchange to keep the asset afloat. Some would argue Binance going under could result in a boost to Bitcoin's appeal as a scare digital asset, with the possibility of traders flocking to peer-to-peer venues.

In terms of faith in exchanges, many feel while a collapse would impact this, 55% of the survey agreed they would continue to make use of a centralised exchange even if Binance collapsed. They would migrate their activity to other available exchanges, although 45% noted they would move everything they had to decentralised exchanges such as Uniswap, PancakeSwap, and SushiSwap. They are against the risk involved with centralised control, and would rather transact solely via non-custodial DeFi protocols. While there are limitations in the DeFi space, some believe the continued collapse of centralised exchanges will ultimately lead to improved and safer DeFi protocols.

The sheer systemic importance of Binance is undoubted, and its collapse would most certainly have a wide reaching impact on crypto. Many agree that some degree of Bitcoin price carnage would be the result of a Binance failure, but many also agree that the nature of Bitcoin is to live on. Some opportunities would evolve from the destruction, a new phoenix could rise from the ashes if the world's largest exchange was to go under. Bitcoin is a volatile asset by nature, but whether it is an easily spooked speculative vehicle or a robust future currency remains to be seen. Either way, whether its a path to destruction or salvation, chances are that Binance will play a huge role in the future of Bitcoin and crypto.

Have a great day.

Peace. CryptoGod-1.

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