Is Binance’s existence in jeopardy after FTX? The cryptocurrency exchange left industry fans in a cold sweat in December as $6 billion was withdrawn in 72 hours, sending investors into a panic and some commentators raising doubts about the company’s solvency.
Although the situation has stabilized since then, the prospect of Binance going bankrupt after a very difficult 2022 marked by the collapse of major cryptocurrencies and the spectacular collapse of FTX still raises fears in the industry.
How FTX’s Fall Spooked Binance
The wind of panic that swept Binance users came in two phases. First, it was the fall of FTX, which suddenly called into question the solvency of other platforms: if FTX, one of the most popular and respected players in the market, turns out to be just a huge scam, who can we trust? Faced with this wave of skepticism, Binance sought to differentiate itself from FTX by distancing itself from its founder and emphasizing the strength of its reserves.
” SBF [NDLR : initiales de Sam Bankman-Fried, le fondateur et dirigeant de FTX] one of history’s greatest con men, he is also a master manipulator of the media and opinion leaders. Binance leader Changpeng Zhao said in a tweet in early December.
Binance has since turned to external audits to give the public more transparency about its finances. Audit firm Mazars confirmed on December 7 that Binance held 575,742 bitcoins worth about $9.7 billion at the time of writing. According to the audit firm, the value of Binance’s assets was 1% higher than the value of its liabilities.
But hell: in mid-December, Mazars announced it would stop conducting stock audits for cryptocurrency companies, including Binance, citing the public’s misunderstanding of the audits, adding that the audits had been misunderstood by the public. assurance of the general solvency of related companies is simply an examination of a very specific category of assets. The Binance audits are subsequently removed from Mazars’ website, causing temporary panic and mass withdrawals from users.
The worst of the storm appears to be over. Binance’s failure is unlikely in a report published Monday, Jan. 2 by American brokerage Bernstein, pointing to $55 billion in cryptocurrency reserves held in the company’s cold wallets and highlighting the platform’s stability. past performance in the face of piracy as well as the ability to adapt to regulations. “ Binance’s undisputed dominance in the market is not accidental, it is the result of its ability to serve its customers throughout history. Report authors Gautam Chugani and Manas Agrawal note.
In the sights of the FTC
But the problems of the platform have not been solved yet. More than a major capital flight, future threats to the company may come from the regulator. So, as noted in Bernstein’s report, since the collapse of FTX, according to this report, the global cryptocurrency has been in a monopoly position, accounting for about 75% of the stock market.
That’s good news in itself, but it could also land it in trouble with the American regulator: The FTC, the US competition watchdog, had already cracked down on Binance in the fall when it announced its intention to buy FTX, before backing down after taking a look. in the company’s accounts.
In addition, the massive withdrawal of funds experienced by Binance is related not only to the FTX case and the Mazars fiasco, but also to the revelation that the US Department of Justice is preparing to open an investigation against the money-accused platform. money laundering and violation of certain sanctions (especially against Iran).
Will Binance soon fall victim to American protectionism?
At a time when Washington is waging a trade war against Chinese tech companies, launched under Donald Trump and continued by Joe Biden, the platform’s ties to China could work against it. Changpeng Zhao was actually born in China before his family moved to Canada when he was twelve years old.
He later returned to his home country as an adult to work in technology, and founded Binance there in 2017 before moving after the Chinese government adopted strict regulations against cryptocurrency. However, journalistic investigations have indicated that there is an office in Shanghai that houses many executives that the company will not close until 2019.
Binance, for its part, denies the existence of this office, and in a blog post published in September, Changpeng Zhao automatically dismissed the accusations, arguing that he and several of his employees were of Chinese origin. Being in the pocket of the Chinese government. ” I’m a Canadian citizen, period he hammers.
The company also hired senior executives from Interpol and the IRS, and established a US legal structure led by experienced American executives. But the platform is also experiencing legal setbacks in other countries, including France.
So, Binance has a tough job ahead of it in the coming months: on the one hand, to avoid the wrath of the American government, and on the other hand, to convince investors of the solidity of its finances. While continuing to attract new users, of course.