The stunning downfall of crypto exchange giant Binance and its founder Changpeng “CZ” Zhao is boosting hopes that U.S. regulators will finally approve spot bitcoin exchange-traded funds (ETFs).
Keypoints
- Binance CEO CZ pleaded guilty to sanctions violations and stepped down as part of a $4.3 billion settlement
- Some observers believe CZ’s demise clears the path for approval of spot bitcoin ETFs in the US
- A former portfolio manager said earlier there’s “no chance” of an ETF while opaque Binance dominates
- The SEC faces deadlines in the next two months to decide on several proposed bitcoin ETF rule changes
- Removing dominant Binance from its key role may make regulators comfortable greenlighting bitcoin investment vehicles
CZ pleaded guilty to sanctions violations on Tuesday and stepped down from leading Binance as part of a settlement with U.S. authorities totaling a whopping $4.3 billion. According to court documents, Binance intentionally maintained weak anti-money laundering controls and relied heavily on American customers for revenue, brazenly violating sanctions and regulations.
While crypto prices initially dropped on the news, both Bitcoin and Binance Coin have bounced back from their lows. Some market observers view CZ’s demise as paving the way for regulatory approval of direct bitcoin investment vehicles like ETFs.
One former equities portfolio manager predicted in June that there would be “no chance” of a spot bitcoin ETF being greenlit while opaque, dominant Binance remained a key player in crypto price discovery. With Binance humbled and agreeing to strengthen compliance, U.S. regulators may finally become comfortable giving select ETF applications the nod.
Lots of chatter on this Blackrock #Bitcoin ETF. And rightfully so. Blackrock more or less IS is the US government. They’ve also received approval on 575/576 of ETF applications.
One thing I’ll say- there is no chance, and I mean zero, that this ETF is approved with Binance in…
— Travis Kling (@Travis_Kling) June 16, 2023
The Securities and Exchange Commission faces looming deadlines over the next two months to decide on several proposed rule changes around bitcoin ETFs. Approvals would allow mainstream investors easy exposure to bitcoin for the first time without needing to directly hold crypto assets.
Bloomberg reports estimate the bitcoin spot ETF market could quickly swell to over $100 billion in assets under management if given the regulatory go-ahead. Giants like BlackRock, Fidelity, and Invesco are among those betting an ETF will prove to be “crypto’s big breakthrough.”
By removing the unreliable Binance from its former position of market dominance, U.S. authorities may have cleared the route for Wall Street to embrace bitcoin investing. Crypto proponents hope Binance’s concessions on financial crimes will help the industry gain mainstream credibility after years of scandals.
Yet doubts still linger whether the exchange can be fully trusted given the brazenness of admitted lapses. Nonetheless Binance possesses enough crypto reserves to easily pay its staggering fines, analysis shows.
As CZ departs the stage, it remains to be seen whether traditional finance will race through the open door for crypto. But Binance’s humbling significantly boosts the odds.
