The prospect of a resolution of the US criminal investigation into Binance, crypto’s linchpin exchange, led to a bout of cautious optimism in digital-asset markets.
Tokens such as Bitcoin and BNB — the coin linked to Changpeng Zhao’s Binance ecosystem — got a tailwind after Bloomberg News reported on Monday that the Justice Department is seeking more than $4 billion to end the years-long probe. Talks between the department and Binance include the possibility that Zhao would face US criminal charges, people familiar with the discussions said.
Read more: US Is Seeking More than $4 Billion From Binance to End Case
Bitcoin traded at $37,385 as of 1:10 p.m. Tuesday in Singapore, up about 1% since the report, while BNB was 6% higher at $263. Smaller tokens were mixed, including drops in the likes of Solana’s SOL and the meme favorite Dogecoin.
“A resolution to the Binance investigation would be unequivocally positive given the exchange’s leadership role in liquidity,” said Sydney-based Richard Galvin, co-founder at Digital Asset Capital Management. At the same time, investors are digesting a “very strong market-wide rally” over the past few weeks, he said.
While the financial penalty would go down as one of the biggest levied against a company by the US government, a resolution would also assuage some worries about the future of Binance. The exchange is the largest in the digital-asset sector and used for both spot and derivatives trading — though its dominance has declined as the company fields regulatory probes in key jurisdictions.
“If Binance settles the criminal lawsuit it means that the crypto industry would have removed the biggest obstacle to the launch of a bull market next year,” said Cici Lu McCalman, founder of blockchain adviser Venn Link Partners.
Digital-asset speculators also digested the latest escalation of the crypto crackdown in the US after the Securities and Exchange Commission accused the Kraken exchange of securities-law violations. Kraken said it disagreed with the SEC lawsuit and planned to “vigorously defend” its position.
The crypto market has partially rebounded this year from massive losses in 2022, with Bitcoin more than doubling on hopes the SEC is poised to approve the first US spot Bitcoin exchange-traded funds after years of skepticism.
“This is better news than Bitcoin ETFs,” Zaheer Ebtikar, founder of the crypto fund Split Capital, said of the potential resolution of the probe into Binance. “Assuming there’s no further investigations, this is as good as it can get.”
The exact details of Binance’s finances are a closely held secret. The company generated at least $20 billion of revenue during the crypto boom in 2021, according to a Bloomberg analysis last year of its trading volume and fees.
“Binance isn’t short on capital and monetary fines are often a cost of doing business in an environment where the rules are ambiguous,” said Greg Moritz, co-founder and chief operating officer at crypto hedge fund AltTab Capital. “Long term, this is almost certainly good news as it provides further clarity on what enforcement will look like and markets love clarity.”
--With assistance from Chris Strohm, Allyson Versprille, Olga Kharif, Muyao Shen, David Pan and Sunil Jagtiani.