According to internal information, the Wall Street Journal broke the news that Binance US (Binance.US) had nearly $70,000 in bitcoin transactions within the first hour of its launch in the United States in 2019.
CZ once explained, "The demand may not come from the outside, I think it is ourselves." However, the Wall Street Journal questioned this, arguing that this operation constitutes wash trading (Wash Trading), the oldest form of manipulation in the securities market, to influence the market The purpose is to artificially create false prosperity in transactions.
The Wall Street Journal cites a 2019 study that said Binance wash sales accounted for more than 46% of global fork trading volume during the survey period. The investigation did not report on Binance US because the platform was in the process of being launched at the time.
It is worth mentioning that the two major financial regulators of the US Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) targeted the world's largest cryptocurrency exchange Binance and its CEO Zhao Changpeng in March and June respectively. Filed a civil lawsuit, accusing the defendant of illegally providing derivatives transactions and violating regulatory rules. Both of them accused Binance of engaging in the use of internal market makers to exercise self-operation.
In the complaint, the SEC accused CZ of exaggerating the trading volume of Binance U.S. through SigmaChain, a company he controlled, as an internal market maker. Binance U.S. management realized that the platform had the risk of allowing wash sales from the beginning. A senior executive told Binance.US then-CEO Catherine Coley that the matching trading engine would allow users to trade with themselves. Coley replied at the time: "If there is some compliance or regulation in the U.S. that says we have to prevent that from happening, we will do it, otherwise we won't."
For the SEC and the media's accusation of laundering, CZ responded simply and rudely by tweeting, and the first text was the number "4". In CZ's own words, "4" means "ignore FUD, fake news, attacks, etc.," implying that regulatory enforcement attacks on cryptocurrencies by institutions have become very common.
A Binance spokesperson responded that the company does not participate in or tolerate wash sales, and that Binance has a dedicated market monitoring team to prevent such behavior. He said, "We strongly believe that the SEC's allegations of wash sales are completely baseless and based on a fundamental misunderstanding of the facts and a misapplication of the relevant laws."
In addition, the spokesperson also stated, “Binance believes that the relevant transactions are completely legitimate interactions involving independent strategies, and said that the scale of transaction activities does not support the statement that the overall transaction volume of the platform has been affected. Before this round of financing (2021) In the past three months, the transaction volume of SiqmaChain self-trading is far less than 0.5% of the total transaction volume of the platform.”
Since Binance and CZ have been under siege for more than a month, their market share is also rapidly losing to other offshore cryptocurrency trading platforms. According to Kaiko’s spot trading volume data, Binance’s market share has dropped from 90% at the beginning of the year to 73% in mid-July.
Meanwhile, its rival OKX’s share rose to 11%, almost doubling from January. Huobi and Bybit have also increased their market share and now account for 9% and 7% of global spot cryptocurrency trading volume, respectively.
These lawsuits have weakened Binance's cryptocurrency market dominance, and now may be the time to "fight back." On July 25th, the large-scale Web3 forum "WebX Conference" in Japan was grandly opened in Tokyo. CZ made an unexpected appearance and pointed out in a video speech at the meeting that Binance's new Japanese platform will fully open its services in August this year.
As early as November last year, Binance acquired the Japanese encrypted asset exchange Sakura Exchange BitCoin (SEBC) with a wholly-owned investment. Agency (JFSA) regulated entities.
On the same day, Binance and CZ filed a license application with the U.S. District Court for the Northern District of Illinois, planning to submit a legal memorandum to initiate a motion to dismiss the CFTC’s prosecution.
According to Reuters, the U.S. House of Representatives Financial Services Committee will vote this week on several bills aimed at establishing a regulatory framework for cryptocurrencies, which would define when cryptocurrencies are a security or commodity, and another bill that would Establish a system to oversee stablecoins. This is the first time a cryptocurrency regulation bill has been voted on in Congress, a victory for cryptocurrency lobbyists who have pushed lawmakers to provide clear regulation for the industry.
It remains to be seen, however, whether the bills will gain Democratic support, which many see as crucial to their eventual passage into law. The measures could also face obstacles in the Democratic-led Senate, where Senate Banking Committee Chairman Brown said he was unsure whether additional legislation to regulate cryptocurrencies would be necessary.
Summarize
The biggest concern for most investors at the moment is whether Binance can continue to operate as usual, and whether it can really operate in the long run? Given the seriousness of the allegations in the lawsuit, the SEC has considerable latitude to order Binance to "suspend and cease" certain activities or operations.
The worst is not over yet, a criminal investigation by the DOJ could force the company to “subdue” to some laws, and CZ could hand over the exchange to a trusted voice and resign as CEO.
However, the current laws or regulations in the United States are unlikely to effectively ban all encrypted assets. Although the SEC can "kill" Binance, it cannot fundamentally destroy the encryption industry.