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Binance Tries to Replace FTX’s Efforts in Fronting Crypto Regulation

Binance announced they wanted to support a “regulatory framework” for crypto, and the exchange has replaced FTX in buying the failed Voyager Digital's assets.

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Binance CEO Changpeng Zhao holds a eagle statue in front of the Binance logo with the message "player of the moth"
Binance CEO Changpeng Zhao has repeatedly spread the message that his exchange and company are both financially stable, but critics point out the company is too opaque to get a good picture of its finances.
Photo: Marco Rosi - SS Lazio (Getty Images)

Binance and its execs have routinely said they won’t follow in the footsteps of Sam Bankman-Fried’s fraudulent crypto empire, but they sure are taking plays straight out of the failed crypto founder’s playbook.

On Tuesday, Binance announced it was hooking up with the Chamber of Digital Commerce, itself a crypto trade association, to help with “discussions with policymakers and regulators” to develop regulations for the blockchain industry.

“Such work is fundamental to our shared mission of fostering the sustainable development of sensible regulations for cryptocurrency and blockchain, which ultimately ensures protections for users,” Binance’s VP of Public Affairs Joanne Kubba said in the release.

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If this is starting to sound like deja vu, it’s because before it imploded, declared bankruptcy, and multiple fraud investigations were launched against its execs, FTX was similarly situated as one of the leading voices for blockchain regulation. FTX founder and CEO Sam Bankman-Fried, who will soon be coming back to the U.S. to face federal charges of fraud and violating campaign finance laws, had donated lavishly to members of both parties. Before the roof fell on his head, Bankman-Fried was pushing for a bill led by Senators Debbie Stabenow and John Boozman that would give more regulatory power to the Commodity Futures Trading Commission.

The Chamber also runs a political action committee that has spent a little over $15,500 as of Nov. 28. That is a paltry sum compared to what Bankman-Fried was putting out, but it is a step toward even more crypto cash falling into politico’s hands.

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Binance and Zhao, who often goes by CZ, have made statements about the need for some crypto regulation, though his newfound willingness to directly enter regulatory proceedings coincides with other news that makes it seem like Binance wants to fill FTX’s decrepit shoes. On Monday, failed crypto company Voyager announced it planned to sell its remaining assets, AKA old customer accounts, valued at a little over $1 billion over to Binance.US, the company’s U.S.-centered arm. Voyager declared bankruptcy earlier this year, and Brian Shroder, Binance.US’s CEO, wrote “our goal is simple: return users their cryptocurrency on the fastest timeline.” 

However, Forbes noted only about $20 million of the buyout would go to the bankruptcy estate. It’s a very similar deal that FTX’s U.S. branch made with Voyager earlier this year, where the now-dead exchange promised $50 million in exchange for $1.422 billion in crypto.

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The total amount Binance is willing to pay is important, especially considering when CNBC asked Binance CEO Changpeng Zhao if his exchange could suffer a $2.1 billion hit if those handling the FTX bankruptcy try to claw back an early investment, Zhao only repeated “we are financially strong.” The company that had conducted a selective “proof-of-reserves” audit for Binance backed out of any crypto-centric audits after being criticized for how little these reports actually showed of different crypto firms’ financial state. CZ said on Monday his company was “consistently profitable.”

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Crypto bros retweeted by Zhao have tried to claim that “comparing Binance to FTX is ridiculous” while citing Binance’s reserves. The problem is, Binance has resisted doing a full audit of its company like rival Coinbase has, which would look at other liabilities rather than just analyze if Binance has a full piggy bank. Op-eds published by the likes of CoinDesk noted how Zhao’s answers have done little to quell anxieties about the company.

The company’s opaqueness was noted in a large Reuters report Monday. Binance does not list an official headquarters, meaning it rarely, if ever, discloses financial information that other public companies regularly do such as its liabilities, costs, and revenues. Though Binance is a private company, the Reuters report noted it analyzed filings in the 14 jurisdictions the company claims it is registered, and noted there was “scant information” pointing to just how well the company is doing. The company has made it clear that most of its revenues come from transaction fees, and Zhao himself has claimed they do not have any venture capital investments and they don’t owe “anybody any money.”

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That’s not to say FTX’s stated “transparency” did anything to stop the exchange from funneling billions of dollars in user’s crypto to hedge fund Alameda Research, which has led to all these federal charges. Still, Binance is currently under federal investigation for money laundering and violating sanctions. So in that way, the two exchanges may have quite a lot in common.