Binance CZ's resignation marks "the end of an era"; a new era awaits

On November 22nd, a shocking news rang out in the cryptocurrency industry. CZ (Changpeng Zhao), the founder and CEO of Binance, announced his resignation.

Binance is known as the world's largest and most famous cryptocurrency exchange. It is at the world's top level in both spot and futures trading of cryptocurrencies, and has more than 150 million users around the world, making it a true leader in the industry.

The sudden resignation of the man who founded Binance and grew it into a leading company in the industry. No one was surprised.

When CZ announced his resignation, he said, "I made a mistake." In other words, he resigned to take responsibility.

The mistake that CZ made was a violation of anti-money laundering laws, which had been pursued by US regulators for some time. Until now, Binance and CZ have consistently maintained their legitimacy, but the situation has now changed.

On the 14th, CZ was ordered to appear in court by a US court and traveled from the UAE. As a UAE citizen, CZ could have refused to appear. However, he still appeared in court.

At the trial, CZ said, "I came to end this problem." It is unclear whether he has given up or won some rights in a plea bargain. However, in either case, it is likely that he wanted to be freed from the curse of pursuit by the regulatory authorities.

As a result, the court recognized CZ's attitude and allowed him to live in the UAE until 14 days before the UAE verdict was handed down. Although it did not directly damage customers, it is an extremely unusual response considering the scale of the business.

The crimes that Binance and CZ admitted to include violations of the Bank Secrecy Act and economic sanctions, in addition to the implementation of the aforementioned anti-money laundering measures. In particular, the authorities are concerned that the system enabled transactions between U.S. citizens and countries subject to sanctions by the U.S. Furthermore, it has been suggested that the neglect of anti-money laundering measures has resulted in funds flowing to countries such as Iran and North Korea, which are then used as military funds.

Binance and CZ have already reached a plea deal with the Department of Justice and have reached a settlement.

When the settlement amounts to be paid to each regulatory agency are totaled, Binance has agreed to pay approximately $4.3 billion. This is an unprecedented settlement amount, which amounts to approximately 640 billion yen in Japanese yen. According to the Department of Justice, this is the largest fine ever imposed on a company in the United States.

In addition, depending on the future plea deal, CZ himself is expected to pay a fine of $50 million (approximately 7.4 billion yen). In addition, it has emerged that CZ may serve 18 months in prison in the United States. This also depends on the plea deal, but it is quite possible that he will serve at least a few months in prison.

The settlement also includes the complete withdrawal of the global version of Binance from the United States. Binance already operates Binance US as a US corporation, but it appears that this will continue to operate as before.

According to Treasury Secretary Janet Yellen, it is Binance itself that is withdrawing; Binance US, which is operated by a different parent company than the exchange and is operated in accordance with a license, will not be affected.

Following CZ's resignation, the cryptocurrency industry will be at a turning point. CZ, who has been at the center of all the joys and sorrows of the industry, is stepping down and stepping away from the limelight, marking the end of an era.

There is another person who speaks in a similar way. Charles Hoskinson, founder of Cardano. Hoskinson praised CZ as "the greatest cryptocurrency entrepreneur of our time, embodying the rapid growth and innovation of the cryptocurrency industry."

Brian Armstrong, CEO of the US cryptocurrency exchange Coinbase, also said, "I hope this incident will be a catalyst for regulatory clarity." Since Coinbase has also been sued by the SEC (US Securities and Exchange Commission) for violating securities laws, this message can also be seen as a request to regulators.

As the two people mentioned above point out, with Binance and CZ's de facto defeat, industry-related companies will no longer be able to compete globally unless they fully comply with regulations. Alternatively, the launch of permission-free services such as DeFi may give a sprout, but it is clear that in the future they will be subject to large-scale regulation.

Going further, if there is a service that does not conform to the will of the United States, which sits at the center of the world, there is a possibility that its movements will be restricted in some way no matter what country it operates in.

Those who call themselves the world's leaders and try to take the lead by proclaiming their advanced nature are actually holding back. As soon as they realize that they cannot catch up, they stop those who are moving forward and drag them down.

The United States, which is lagging behind in regulatory development and is clearly losing its presence in the Web 3.0 field compared to the Middle East and emerging countries, may only be able to tighten the screws on innovation in accordance with old regulations. If we are talking only about the Web 3.0 field, in order to escape from this situation, it will be necessary to clarify and establish regulations as soon as possible.

Richard Teng has been appointed as the new CEO of Binance. Teng has been the global head of regional markets at Binance, and has a career spanning more than 30 years in the financial industry, including serving as CEO of the financial services regulator at Abu Dhabi Global Market (ADGM).

The reason behind the selection of Teng is the aim to facilitate communication on the issue of regulations, which are also problematic outside the United States. There may also be an aim to demonstrate a commitment to complying with regulations to such regulators.

On the other hand, although he may have a track record as a practitioner, it is undeniable that he is not yet capable of assuming the position of "face of the industry" that CZ has built up. It has only been a short time since he took office, and if he gets more exposure from now on, the view may change, but at this point, there is no vision that can carry the brand image of Binance on his shoulders.

In that case, the next person to take the throne of the industry vacated by CZ's retirement is of growing interest.

Now that CZ is no longer the absolute pillar, there is a possibility that the power struggle and the balance of influence within Binance will change in the future. However, because CZ's presence was too great, Binance probably did not have much time to train a "post-CZ". With that in mind, it would be best to look outside in order to find someone to take the seat.

From an objective perspective and with my own personal opinion, I would say that Armstrong, who is currently the CEO of Coinbase, is one of the people most likely to make his presence felt as the face of the industry.

If the era built around CZ was the stage of spreading the existence of cryptocurrencies to the world and building innovation, I believe that the next era will be "an era of full compliance with regulations".

This may have been the case in the past, but it has only been a few years since the focus was clearly on customer protection and compliance with regulations has been required. In that case, Armstrong, who already provides compliant services and strongly demands clarity in regulations, is a good fit for the coming era and is likely to become an even more important flag-bearer than ever before.

However, the industry is changing very quickly. Maybe the person we are currently discussing who will be the next CZ is a thing of the past. Or maybe a new entrepreneur will emerge and take the throne right away. This is also something that could happen in the fast-moving cryptocurrency industry.

The settlement between Binance and CZ and the regulators could have a positive impact on the industry.

At the very least, the impact of this incident on cryptocurrency prices was extremely small, and prices have already recovered, especially for major cryptocurrency brands such as Bitcoin. Rather, one issue of concern for the industry has disappeared, and the price drop that occurred once could be said to have given an opportunity to enter the market.

In addition, if Binance were to suddenly close, or if CZ were to be arrested without the situation being understood, the impact on the market would be immeasurable. In fact, the US Department of Justice was concerned that if CZ's arrest or moves to dismantle Binance were strengthened, it would have a devastating effect on the market.

In that sense, the settlement was the best possible end for the industry with an eye to the future.

Furthermore, it is expected that the establishment of regulations and discussions in the US will accelerate further in the wake of this incident. If this serves as a trigger for the improvement of the market environment, it may become easier for many entrepreneurs to enter the Web 3.0 field than ever before, accelerating innovation.

The industry is moving fast, and the time has come to make a new start for the next era.

Image: Shutterstock

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◉Shogo Kurobe
He entered the cryptocurrency industry in 2018. With experience studying writing and writing novels as a student, he is involved in writing, planning and editing articles on cryptocurrency and blockchain. He was appointed deputy editor-in-chief at J-CAM Co., Ltd. in April 2022, and is currently in his current position. He launched "Iolite" in March 2023.

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