Binance Connect Shutdown Highlights Crypto’s Ongoing Identity Crisis –

The year 2022 could not have been better for the worlds largest cryptocurrency exchange,Binance.

Crypto markets were coming off an all-time high, and the November implosion of rival exchangeFTX, Binances biggest competitor, left the platform alone at the top of the digital asset market.

[F]or now, all Ill say is: well played; you won,tweetedFTX Co-founderSam Bankman-FriedNov. 10, 2022, the day before his multibillion-dollar crypto empire filed for bankruptcy amid a self-inflicted and allegedly criminal solvency crisis.

Then 2023 came and everything changed.

Bankman-Fried wasarrested, extradited from the Bahamas, and now resides in a United Statesjailawaiting criminal trial this October.

Rather than being able to capitalize on FTXs collapse and win market share, Binances own borderless crypto empire instead became the target ofregulatorsaround the world who feared its business model similarities to FTX could be obscuring similar questionable practices.

TheSecurities and Exchange Commission(SEC)filed 13 chargesagainst Binance and its founder,Changpeng Zhao, in June, alleging a variety ofsecurities law violationsand claiming the platform engaged in an extensive web of deception.

Binance has been accused of illegally serving American customers, inappropriately controlling clients assets, and disregarding compliance and anti-money laundering (AML) standards.

Unidentified former company insiders have said the cryptocurrency exchange mixedcustomer fundswith its own revenue the very same bad behavior that took down FTX.

Now, the company is shutting down itsBinance Connectservice, which launched in March 2022 to help companies become crypto-ready and accept payments in crypto, as well as filing for aprotective orderagainst the SEC.

But will the defensive measures pay off?

Read also:Crypto Wilts in Summer Heat as SEC Charges Both Binance and Coinbase

We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk all in an effort to maximize their own profits,Gurbir S. Grewal, director of the SECs Division of Enforcement, said in the agencyspress releaseannouncing the charges.

It is a statement that some believe could be leveled at nearly any player in the crypto sector, as the industrys reputation as a lawless Wild West ofdigital innovationwas what drew in, and appealed to, many of the sectors most ardent enthusiasts.

The crypto community believed and had a real conviction what they were doing was so new that existinglawscould not possibly apply,Amias Gerety, partner atQED Investors, told PYMNTS. And in the history of financial services, theres basically never been a group of people with any commercial success who had that conviction.

[O]nce you have that conviction, then you start searching for excuses not to comply [with the law], he added.

SEC ChairmanGary Genslersaid May 15 at theFederal Reserve Bank of AtlantasFinancial Markets Conference: [Crypto] business models tend to be built on taking customer funds,comminglingit.

Binance, for its part, described the SECs attack as stunningly overbroad and unduly burdensome requests in acourt orderfiled Monday (Aug. 14).

Binance, Zhao and former Chief Compliance Officer Samuel Lim are also facing alawsuitfrom theCommodity Futures Trading Commission(CFTC), which claims the company was operating in violation of the Commodity Exchange Act and related regulation.

The CFTCs suit, filed in March, described Binance as an illegal exchange with a sham compliance program.

In amotion to dismissthe case last month, Binance argued that its holding company is located in the Cayman Islands, and Zhao is a Canadian citizen, meaning the CFTCs claims should be dropped.

Binance did not immediately reply to a request for comment from PYMNTS.

Zhao has repeatedly dismissed his enterprises ongoinglegalwoes as FUD, or fear, uncertainty and doubt, even going so far as to tweet the number 4 in reference to what he sees as unnecessary FUD.

For an industry whose early and rapid growth was aided by a haze of regulatory uncertainty, cryptos future particularly within the U.S. remains unclear as the newness wears off.

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Binance Connect Shutdown Highlights Crypto's Ongoing Identity Crisis -

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