Why the CFTC Case Is Much More Than Just A Passing FUD for Binance?

Bhushan Akolkar
March 28, 2023
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CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
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On Monday, March 27, the US Commodities and futures Trading Commission (CFTC) sued crypto exchange Binance and its CEO Changpeng Zhao over the allegations of violations of derivative regulations.

The Binance chief has, however, rejected the charges stating “Ignore FUD, fake news, attacks, etc.” Although Binance has been at the center of several legal controversies in the past, this is more than just a FUD for Zhao and his team.

The blog post from Binance hints that they are ready to dig into a legal fight. However, getting past the lawsuit from the CFTC could be an uphill task for Binance. The CFTC has alleged that Binance failed to register itself as a US derivatives exchange. They further add that the crypto exchange structured its business operations in a manner to avoid registration requirements.

CFTC further added that Binance and CZ violated US laws by further encouraging US customers to use VPNs and thus bypass their location details. The agency also added that Binance directed its “VIP customers” to open accounts in the name of shell companies.

Although Binance has refuted all the allegations in its blog post, industry players believe that CFTC’s charges are quite serious in nature. Tim Massad, the former chairman of the CFTC who is now director of the Digital Assets Policy Project at the Harvard Kennedy School, told Bloomberg:

“It’s a set of very strong allegations. They are seeking a permanent injunction against the defendants, so that would include CZ personally as well as Binance, from essentially doing business in the US, basically from ever registering in the US or engaging in commodities transactions in the US.”

Binance Is Much Greater Than FTX, Too Big to Fail?

Ever since the collapse of FTX in November 2022, Binance’s dominance in the crypto space has continued to grow. The exchange accounts for 70% of all trading volumes in the crypto spot market. Similarly, in terms of the perpetual futures, Binance controls a total of 62% of the global volumes in 2022.

Thus, it enjoys a clear dominance in the crypto space over its rivals like Coinbase. The recent action by CFTC on Binance could have a broader market impact. Bitcoin and the broader crypto market tanked immediately by 3% soon as the news of CFTC’s lawsuit on Binance came out.

Binance’s ties with traditional banking partners has also frayed with the recent collapse of the Signature Bank. If the lawsuit on Binance drags for a longer time, just as in the case of Ripple, it could have greater consequences on the crypto space in comparison to the events of the recent past.

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Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Why Trust CoinGape

CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights Read more…to our readers. Our journal analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.

About Author
About Author
Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets. 

He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.