Binance, the world’s largest cryptocurrency exchange, is dealing with some major uncertainty after getting hit with a lawsuit from the US’s Commodity Futures Trading Commission, or CFTC. It’s the latest example of the increased federal scrutiny the industry has been under following a wave of scandals in the last few years.
The lawsuit, which was filed on Monday, alleges that Binance intentionally evaded US laws including failing to register in the country and allowing Americans to trade crypto derivatives, which is barred for retail investors. Binance CEO Changpeng Zhao has called the lawsuit an “incomplete recitation of facts” in response. Since then, investors who use the platform have pulled out $1.6 billion, a significant uptick in withdrawals, though experts note that Binance’s reserves may be big enough to withstand such a hit.
The lawsuit could have bigger impacts for Binance’s business long-term, according to a report from CNN’s Allison Morrow. If the CFTC suit is successful, it could result in “hundreds of millions” in fines as well as a possible ban on Binance’s ability to register as a derivatives trader in the US down the line. That would deal a serious blow to Binance’s derivatives revenues, 16 percent of which comes from the US, CNN notes.
“The cryptocurrency industry has recently faced several significant challenges, beginning with the Terra/Luna meltdown, followed by FTX, and now Binance,” says MIT Cryptoeconomics Lab founder Christian Catalini. “Concerns regarding Binance’s compliance and regulatory practices have been raised for some time, and the evidence brought forth by the CFTC is quite damning.”
What this could mean for crypto overall
For those who may not know Binance as well, it’s one of the biggest crypto exchanges in the business and it handled approximately $23 trillion in trades in 2022. Previously, Binance also reportedly considered bailing out cryptocurrency exchange FTX when it declared…
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