The settlement between Changpeng Zhao, former CEO of Binance, and the United States Department of Justice makes the lesson very clear: the need for cryptocurrency exchanges to join in the regulation of the cryptocurrency ecosystem.
Yesterday, the decision of Changpeng Zhao, better known as CZ, to resign from his position as CEO of Binance made headlines worldwide. This was part of an agreement with the authorities and regulators of the United States, in order to collaborate and solve the enormous amount of legal problems that Binance has dragged along in that country with the operation of its two business branches: Binance and Binance US.
Broadly speaking, the agreement requires Binance to pay $1.810 billion over 15 months, along with an additional $2.510 billion in forfeiture, as part of the settlement with the Department of Justice, as reported by CZ himself and the prosecutors in charge of the case. In addition to this, CZ must personally pay another $50 million, as part of a personal fine, and completely withdraw from Binance for at least 3 years. The information has been made public by CZ, through his count in X.
Certainly, this is a big blow for Binance, but at the same time, It is a key demonstration of the importance of following financial regulations to ensure safe operations.
The correct road
So, the lesson we can learn from what happened at Binance is: The importance of cryptocurrency exchanges following financial regulations when operating.
First of all, it is important to understand that exchanges are a vital component within the cryptocurrency market, as they facilitate the purchase, sale and exchange of different cryptocurrencies to users on a mass scale. As intermediaries between users and cryptocurrencies, Exchanges must ensure that transactions are secure, transparent and fair, not only for users, but also for the governments and authorities where the exchange operates.
In all of this, the application of financial regulations is vital and the right path to follow. This is in order to ensure that the exchange operates legally, and at the same time, users have the peace of mind that the exchange offers guarantees of security and protection of users' funds.
This is where security and compliance measures such as Know Your Customer (KYC) come into play, allowing exchanges to verify the identity of users and prevent the use of anonymous or fake accounts. The application of financial regulations, such as Anti-Money Laundering (AML) and Combatting the Financing of Terrorism (CFT), are also important to prevent money laundering and terrorist financing through cryptocurrency transactions, among other measures, such as fund insurance, digital security standards, and all regulations applicable to the operation of exchanges.
Finally, compliance with financial regulations is critical to the stability of the cryptocurrency market. By following best security practices and complying with regulations, exchanges gain the trust of users and regulators. This in turn fosters a safer and more reliable environment for trading cryptocurrencies, which can attract more participants to the market and promote its growth.
The sins of Binance
The above helps us understand what Binance's faults or "sins" have been. First of all, you should know that the United States Department of Justice has been building this case since 2018, and it has only just reached a point in 2023 when the case has reached a point where the evidence puts the company in a highly compromised position. Among Binance's faults are:
- Money laundering allegations: Binance founder Changpeng Zhao pleaded guilty to a felony charge of failing to take steps to prevent money laundering. Binance admitted to violating the Bank Secrecy Act and sanctions programs.
- Transactions with illicit actors: Binance processed transactions made by illicit actors and enabled transactions that violated US sanctions, such as trading with Russia or the terrorist group Hamas. This has raised concerns about the integrity and security of transactions made on the platform.
This action has led to Binance, after CZ's decision, suffering almost 1,4 billion dollars in withdrawals, for fear that Binance will suffer any kind of mishap in its financial sustainability. To all this, we must add the previous withdrawals, which already reach a figure of more than 12 billion dollars, according to Forbes.
Bit2Me's position: following regulations
Following the events at Binance, Bit2Me's position has been clear from the beginning: follow regulations in order to provide our users with the peace of mind of operating with a secure, transparent and legal platform. You can be sure that this line of operations will continue to be maintained and that, to do so, we have the support of large companies such as Ledger, Telefónica, VISA, Jumio and Pecunia, which day after day allow us to achieve this goal.
We would also like to take this opportunity to point out that at Bit2Me we will work tirelessly to ensure that all the benefits of our platform are there for you at all times. From our wallet service for buying, selling and exchanging cryptocurrencies in a simple way, to our trading platform (Bit2Me Pro), staking, earning, loans, OTC and more. Our entire suite of services, including customer service and more, will be there for you, with the trust, security and reliability that Bit2Me has earned in its almost 10 years of existence.
Continue reading: Bit2Me is recognized as one of the most reliable crypto platforms, ahead of Binance and Coinbase
