- The legendary Canadian investor and journalist compared the battle between Binance and FTX as a drama from classical Greek mythology.
- He claims that the monopoly of Changpeng Zhao (CEO of Binance) will not take long to collapse in the same way as that of his rival.
- On the other hand, the expert assures that this will pave the way for a renaissance of the cryptocurrency market.
Famed investor and TV host Kevin O’Leary once again lashed out at the world’s largest cryptocurrency exchange. During an interview with Yahoo Finance, he assured that the good taste of Binance’s victory over FTX lasted a few weeks. Thus, the company led by Changpeng Zhao (CZ) is doomed to collapse.
This is not the first time that the investor has lashed out against this digital currency trading exchange. Last December he claimed that the bankruptcy of FTX would have been a work organized from CZ’s company. This time he reaffirmed his words, but added that now it is the turn of the victorious exchange to be held accountable.
The expert says that the fall of the two leading companies in the world of cryptocurrencies would be an event of great repercussions. However, he stresses that this does not represent the end for that market, but a renaissance with abundant investment opportunities. In his opinion, it would be a purge that would end with a strengthened crypto sector and companies that comply with the regulators’ laws.
Such a scenario, he explains, would allow investments to flow unimpeded into the major currencies. In December, to the venture capitalist’s accusation of bankrupting FTX, CZ’s exchange responded by calling him a “liar.”
Binance’s “Pyrrhic Victory” over FTX
The investor is absolutely certain that Binance’s victory in the crypto market depended on getting its main rival out of the way. In that sense, he compares the rivalry between the two companies as a typical battle of the gods in Greek mythology. He points out that the two major companies in a young market surrounded by dangers, instead of working together, focused on the battle between them.
“The two pioneers, the ones in charge of creating and making this nascent industry global, Sam Bankman-Fried and CZ went to work against each other like in Greek mythology. And one of them, CZ definitely broke Sam Bankman-Fried using the FTT token in the coup de grace on November 6,” he says during the interview. He goes on to add that the outcome of that fight left CZ as the lone market leader “but only for a few weeks”.
As a consequence, he says that this monopoly is short-lived due to the actions of the regulators, who went after it immediately. Here would come the big problem for the platform because regulators and investment funds around the world need to work with U.S. regulators. At that point, O’Leary stresses, the SEC will tell regulators in those countries that the exchange does not meet their standards and they will have to make decisions.
“What are you going to do?You’re going to say, listen, I love you honey, but I don’t think we can license you here because we have to resolve an issue in the U.S.,” he comments on the exchange’s future before regulators around the world. As a result, Binance’s victory over its closest rivals would have ended abruptly, just like the Sam Bankman-Fried story, in the investor’s view. “The two big boys killed each other, it’s a fantastic Greek tragedy,” he specified.
A new era for the digital currencies market
Contrary to what many advocates of the platform fear, Binance’s downfall would not spell terminal tragedy for the crypto market. The latter is what the interviewee thinks. The blow will be strong and virtual currencies will probably go to the floor in terms of prices and capitalization. But it would be a process of renewal that would allow them to stand up without the weight of exchanges that evade regulatory rules, he considers.
“I think it’s game over for CZ, it’s in check and it’s a matter of time before it starts a run on the $65 billion BNB token,” the expert made clear. Then would come a new dawn in which exchanges will work in the same way as banks in terms of licensing and regulatory compliance.
The expert remarked that there is a tragic problem among banks and that small and medium-sized lenders have reached the end of their road. This scenario would be the prelude to the massification of cryptocurrencies. People are already starting to look at these assets as an alternative to state-owned banks that failed to go down the road to success. In their opinion, this is the great business of investing now in digital currencies.
The eventual collapse of Binance after its victory will become a sign of the new stage of the crypto market. It will present itself as a mature and risk-free option for large capitals.
“I don’t like to speculate, but look ahead. All players who are not in harmony with the regulators now, starting with the founders of the crypto industry, will all be swept away and a new generation of cryptobanks will arrive onthe scene,” the expert added.
Regulators want to settle accounts with CEXs
Centralized cryptocurrency trading platforms, or CEXs, are in the midst of a strong onslaught from regulators. This medium reviewed the most recent cases brought by the Securities and Exchange Commission (SEC) against various companies linked to the sector.
From Tron, Kraken and Coinbase came under fire from the regulatory agency in recent weeks. A few days ago, in the heat of the SEC’s Wells notice (lawsuit in process) against Coinbase, Investor Times advanced that similar actions against Binance were imminent, as indeed happened shortly thereafter. Thus, the Commodity Futures Trading Commission (CFTC) announced a lawsuit proceeding against the CZ company.
The regulators accuse Binance of trading financial products without the respective licenses required for the case. Within the U.S. territory, individuals are prohibited from trading crypto derivatives. Meanwhile, the platforms that offer that service must prohibit them to their users in the North American country. Precisely, that would be the case against Binance, a company facing its first serious challenge after the victory over FTX.
This lawsuit episode is the one referred to by Kevin O’Leary in the aforementioned interview with Yahoo Finance. The most important crypto trading exchange is now in serious trouble and the market is in a tense calm. A large portion of digital currency users do not know how to trade within that market without that platform. The latter suggests that cryptocurrency trading could collapse.
Despite calls from industry enthusiasts not to fall into FUD (initials for fear, uncertainty and doubt), the attitude of U.S. regulators toward CEXs leaves no room to expect mediation or half-measures. For now, Binance is trying to calm the waters and even sent a public letter to some senators clarifying its business scheme.
The accusation against the exchange and the pressure of the media
The recent episode of the U.S. regulatory authorities against the CZ platform is based on illegal trading activity with derivatives. There is no other type of indictment against the company, such as money laundering or other serious violations. While this is definitely positive for the company it also does not mean that the illegal sale of financial products is a minor problem.
To stay liquid, a company the size of Binance needs to deal with the big boys on Wall Street. Some of those derivatives trading companies dodge Binance’s KYC because they have offices in various parts of the world. So when the platform asks them if they are a U.S. company, they can easily say: we are a global company, Bloomberg explains. But they then point out that that’s not right.
On that assumption, CZ’s company allows illegal operations within the United States through the use of VPNs, denounces the aforementioned media. Another sensitive accusation came from another major media outlet, the Financial Times. In a recent report, the portal accuses the exchange of hiding its ties with China. Changpeng Zhao, who is Chinese by birth, reacted to the accusation and accused the media of promoting an inaccurate image of his firm.
Citing access to internal documents obtained from anonymous sources, the FT piece claims that the company actually contradicts its claims in practice.
“Binance hid substantial ties to China for several years, contradicting executive claims that the cryptocurrency exchange left the country after an industry crackdown in late 2017.”
The Exchange responded to the media outlet, “It is unfortunate that anonymous sources quote ancient history (in crypto terms) and describe dramatically erroneous events. This is not an accurate picture of Binance’s operations.” Despite Binance’s resounding victory against FTX, the situation does not look the most comfortable for the company, suggesting that they need at least another win to stay afloat.
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