In response to Binance CEO Changpeng Zhao’s guilty plea, agreeing to a $50 million fine, and Binance facing a $4.3 billion penalty, Matrixport analyst Markus Thielen suggests that the settlement could have positive implications for the approval odds of a Bitcoin spot ETF.
Changpeng Zhao’s sentencing hearing is scheduled for February 23, 2024, with the possibility of facing up to 18 months in prison. The charges include money laundering violations, conspiracy to conduct an unlicensed money-transmitting business, and U.S. sanctions violations, involving transactions totaling $898 million.
Despite CZ stepping down and the fine being lower than initially feared ($10 billion), Matrixport’s analysis indicates that Binance is likely to maintain its position as one of the top three exchanges over the next 2-3 years. However, there could be pressure to ‘right-size’ the company, which currently employs around 6,000 people.
The plea deal does not involve the U.S. Securities and Exchange Commission (SEC), but it is seen as a favorable outcome for CZ and Binance, especially considering the swift regulatory actions following the FTX/SBF trial. The regulatory impact is expected to extend beyond Binance, prompting increased compliance efforts across the industry. More exchanges are anticipated to enhance their compliance programs and engage in surveillance-sharing agreements.
Matrixport’s Markus Thielen @GetDeFiResearch remarked that the settlement represents a highly favorable outcome for both #CZ and #Binance. With CZ’s resignation and the fine amounting to less than the anticipated $10 billion, Binance is expected to maintain its status among the… pic.twitter.com/rzoWFqSJjM
— Matrixport (@realMatrixport) November 22, 2023
According to the analyst, this development is instrumental in securing approval for a spot Bitcoin ETF in the United States. The plea agreement is seen as boosting expectations for a Bitcoin spot ETF approval to 100%, forcing the industry to adhere to rules akin to traditional financial firms. This shift toward compliance is expected to strengthen the case for Bitcoin adoption among institutional investors, positioning it as a safe-haven asset in their portfolios.
Looking ahead, the analyst envisions a transformative shift from unregulated exchanges to fully regulated venues, primarily catering to institutional investors. With institutional demand on the rise and regulatory support, 2024 is anticipated to be a pivotal year for Bitcoin. There’s even speculation about CZ potentially returning during the next bear market in 2026.