Last updated on May 3rd, 2024 at 08:17 pm
The crypto market faced a major setback when the U.S. Commodity Futures Trading Commission (CFTC) announced that it was taking legal action against Binance, the world’s largest cryptocurrency exchange.
On Monday, March 27, the CFTC filed a lawsuit against Binance and its founder, Changpeng Zhao, alleging that the company knowingly offered unregistered crypto derivatives products in the United States in violation of federal laws.
This move by the CFTC has resulted in widespread uncertainty and has once again raised concerns about the regulatory environment of the crypto industry. Many experts believe that this move by the CFTC could have a ripple effect on other crypto exchanges and potentially impact the entire crypto market.
Bitcoin (BTC) fell sharply in reaction to the news and hit an intraday low of around $26,508 on the same day. However, the good news is that Bitcoin has started to recover and is currently trading at $27,447.
Details of the CFTC’s Lawsuit Against Binance
According to a Bloomberg report, the U.S. CFTC alleges that Binance and its CEO Changpeng Zhao repeatedly violated American derivatives regulations while expanding its operations to become the biggest trading platform globally.
The CFTC charged Binance with violating laws governing futures transactions, “illegal off-exchange commodity options,” failing to register as a futures commissions merchant, designated contract market, or swap execution facility, failing to supervise its business, failing to implement know-your-customer or anti-money laundering processes, and having a poor anti-evasion program.
The company was also accused of failing to register with the commission years after its establishment, disregarding the CFTC’s guidelines. According to the CFTC, the company’s CEO instructed American customers to use virtual private networks to conceal their locations.
Furthermore, the regulator alleged that Binance did not comply with important regulatory guidelines meant to prevent and identify money laundering and terrorist financing. They accused the exchange of failing to mandate users to provide proof of identification before engaging in trades.
Gretchen Lowe, the chief counsel in the CFTC’s enforcement division, claimed that Binance’s compliance efforts were a facade, as evidenced by their internal emails and chats. She further alleged that Binance consciously prioritized profits over complying with the law.
The federal regulator urged the court to impose financial penalties, restrictions on trading and registration, and other sanctions on the exchange.
Binance CEO Responds to CFTC Lawsuit – Expresses Disappointment
Binance expressed its disappointment and surprise regarding the CFTC’s legal action. The cryptocurrency exchange stated that it had collaborated with the regulatory body for the past two years and intended to maintain its partnership with authorities in the U.S. and other locations.
My Response to the CFTC Complaint | Binance Blog https://t.co/TadyotM7HN
— CZ 🔶 Binance (@cz_binance) March 27, 2023
The crypto exchange also confirmed that it had expanded its compliance team, invested heavily in improving surveillance capabilities, and implemented substantial measures to prohibit U.S. citizens from accessing its international trading platform.
Binance stated:
“We have made significant investments over the past two years to ensure we do not have U.S. users active on our platform.”
According to Binance, after conducting an initial review, they believe that the complaint lacks a complete recital of facts and disagree with the portrayal of several issues stated in the complaint.
In a statement, Zhao emphasized Binance’s commitment to finding peaceful resolutions to any issues that arise. He noted the company’s willingness to work closely with regulators and government agencies worldwide, acknowledging that there is always room for improvement. Zhao also added that Binance sets rigorous standards for itself, often surpassing the requirements of existing regulations.
Zhao stated:
“And above all, we believe in doing the right thing by our users at all times. In this journey towards freedom of money, we do not expect everything to be easy. We do not shy away from challenges.”
The Lawsuit’s Impacts on Bitcoin and Wider Cryptocurrency Industry
News of the lawsuit rocked the cryptocurrency industry, causing significant declines in both the value of Bitcoin and the overall crypto market. Investors reacted quickly, withdrawing over 3,400 BTC from Binance within 24 hours of the announcement, anticipating market volatility. This led to BTC slipping below the $27,000 support level.
BTC is currently trading at $27,323, reflecting a 3.50% drop within the last 24 hours. The current Bitcoin price chart shows an unstable trend, with potential resistance around $28,900. Despite this, the recent price has remained relatively stable, with BTC’s price hovering around $27,400 and a 24-hour trading volume of 2.75%.
If BTC manages to surpass the resistance level at $28,950, its value could rise to $29,200 or even $30,000. On the other hand, if a bearish trend emerges, Bitcoin’s price is expected to find solid support levels at $26,600 and $25,200.
In the meantime, Ethereum (ETH) is treading a similar path to Bitcoin and is currently trading at $1,779, down 3%, with a 24-hour trading volume of 0.34%.
Ethereum is struggling to break through the $1,800 resistance level and hovers around the $1,700 support zone. If Ethereum eventually manages to break through the $1,800 barrier, it will likely face resistance at the $1,900 level.
Michael Saylor, the CEO of MicroStrategy and a vocal supporter of Bitcoin, recently made a $150 million investment in the cryptocurrency. This action has sparked debate among cryptocurrency enthusiasts about its potential market impact, raising hopes for a Bitcoin bull run.
JUST IN : 💰 Microstrategy Secures 6,455 Bitcoins in $150 Million Deal at $23,238 Average Price.
The news about MicroStrategy’s recent #Bitcoin purchase is a significant development in the crypto space.
🔥🔥Four things to watch-out for in the Crypto market!
RT 💯 pic.twitter.com/D22arLuaTH
— Joe writes (@smileantidote) March 27, 2023
The acquisition suggests that institutional investors are beginning to show interest in the market again, subtly hinting at a growing confidence in Bitcoin. Furthermore, there has been a notable increase in the participation of big-time investors in the crypto market, evidenced by the surge in whale activity on the network. This positive development is expected to play a vital role in preventing further declines for BTC.
People thinking this is the End of Binance and Crypto because CFTC Sued Binance.
This is how it will end.
1. Government will ask Binance to pay a Huge Fine.
2. The fine will be equal to how much CZ spends on Lunch on the days he doesn’t have lunch.
3. Back to Business.
— Emperor👑 (@EmperorBTC) March 27, 2023
Some community members and analysts do not believe the CFTC lawsuit would cause significant damage to the crypto market. A user (@EmperorBTC) tweeted about the lawsuit, predicting that the case would end with Binance paying a “huge fine equal to what C.Z. spends on lunch.” This tweet may be amusing, but it could also have some truth to it, considering the fact that Binance.US recently made headlines for reaching a settlement with U.S. regulators to resolve pending regulatory and law enforcement probes into its operations in the country.
According to a research report by Bernstein on Tuesday, the CFTC may force Binance to stop operating in the United States as part of a potential settlement. The report noted that Binance’s operations in the U.S. make up less than 5% of the exchange’s overall business.
Since cryptocurrency trading is a global industry, Bernstein predicts that Binance will focus on protecting its primary international business, which generates the most revenue, and where the company has pursued licenses in Europe, Africa, and Australia, as stated by analysts Gautam Chhugani and Manas Agrawal.
According to a tweet by Adam Cochran, a Partner at MetaCartel Ventures DAO, the CFTC is making an effort to deal a severe blow to Binance, and Cochran believes that they have a strong likelihood of succeeding in bringing down the Binance empire. Cochran also mentioned that this case has been rumoured for a long time but was denied by Binance, and the CFTC is now going all out to crush them.
Cochran clarified that this scenario assumes that Binance is found guilty and must comply with the CFTC’s demands, which would undoubtedly result in Binance’s downfall. The CFTC has put Binance, CZ, Lim, and other executives at odds with each other, creating a situation where they must either pay a significant sum of money or disclose every detail of their past actions.
Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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