Cryptocurrency back under microscope as former Binance chief pleads out
I was going to write that it has been a turbulent few months for cryptocurrency, but when is that not true? Bitcoin’s wild fluctuations have continued, shooting up as regulators approved the sale on stock markets of crypto-stuffed investment vehicles and falling as early investors cashed out.
As far as news goes this is ‘dog bites man’ or ‘water is wet’ stuff, though. Perhaps more interesting is the latest move toward legitimacy in the financial assets: the jailing of another cryptocurrency exchange boss.
On Tuesday, Changpeng Zhao (aka CZ), the former chief executive of Binance, was sentenced to four months in prison by a court in the US after pleading guilty to violating laws against money laundering.
Zhao resigned as the head of Binance in November 2022 following a settlement with US authorities.
Zhao took his medicine, saying he would surrender voluntarily. Indeed, the judge in the case noted that the Dubai-based Zhao had come to face trial in the US of his own volition.
Unlike Sam Bankman-Fried, the former boss of failed cryptocurrency exchange FTX, Zhao will be a free man in a few months. Convicted of fraud and conspiracy, Bankman-Fried received 25 years in prison from a US court last month. Zhao, on the other hand, was convicted only of failing to prevent money laundering.
Paradoxically, this conviction is exactly what cryptocurrency exchanges – and crypto fans – want.
By surrendering to the authorities and, more importantly, complying with basic financial regulations, cryptocurrency businesses, and investors, are hoping to create a new image, one far from crypto’s reputation as a combination of a Ponzi scheme and a waste of energy.
Posting on X (formerly Twitter), Zhao himself sought to turn the bitter lemon of the judgement into lemonade, saying: “Our industry has entered a new phase. Compliance is super important. A silver lining of this whole process is that Binance has been under the microscope”.
After all, in order to grab mainstream legitimacy cryptocurrencies need to shed their get-rich-quick image. The US financial regulator, the Securities & Exchange Commission’s January authorising of stock market-traded funds, known as ETFs, to hold bitcoin was a major step in this direction.
Whether it would be wise to plan retirement with an investment in an asset class that creates no value and, after 15 years, has yet to provide a rational use case is quite another matter.
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