Binance has lost its top bean counter just as regulatory headwinds threaten to blow the troubled cryptocurrency exchange off its pedestal.
Binance announced early last week that Wei Zhou, the company’s chief financial officer for the past three years, had “decided to leave for personal reasons.” Binance CEO Changpeng ‘CZ’ Zhao’s traditionally chatty Twitter feed has so far said nothing about Zhou’s abrupt departure, which comes as the company is under assault on a growing number of legal fronts.
Since the year began, investigations into Binance’s activities have been launched by the U.S. Commodity Futures Trading Commission (CFTC) and Germany’s Federal Financial Supervisory Authority (BaFin). In May, Bloomberg reported that the U.S. Department of Justice (DoJ) and Internal Revenue Service (IRS) were investigating Binance, allegedly on suspicion of money laundering and tax offenses.
Last week, CoinDesk reported that Palestinian militant group Hamas had recently transferred up to $100,000 in BTC to its military wing through Binance. The exchange eventually blocked the Hamas-linked wallets, but only after blockchain analysts traced the transfers back to Binance.
Also last week, the California-based Silvergate Bank announced it would discontinue all USD deposits and withdrawals for Binance, which had only introduced the Silvergate funding option six months prior. The unexplained disruption doesn’t impact Binance’s U.S. offshoot Binance.US, although few U.S. residents use the local version (primarily due to high withdrawal fees and lack of liquidity).
Also last week, India’s Enforcement Directorate announced a probe into the Binance-owned WazirX exchange for alleged violations of the Foreign Exchange Act involving around $390 million in suspect transfers. The probe was launched following an investigation into Chinese nationals offering illegal online gambling to Indian bettors and then laundering their ill-gotten gains through WazirX and Binance through a process that involved the Tether crime coin.
It’s fairly obvious that this was not a great week to be a Binance C-suite occupant. But it remains unclear whether Zhou’s decision to activate his ejector seat was driven by corporate burnout or a sense that the legal walls were closing in.
CZ’s silence regarding Zhou’s departure could perhaps be explained by his being all tweeted out after all the public cheerleading of El Salvador’s recent decision to make the BTC token legal tender. El Salvador’s legislature voted in favor of the initiative last week, mere days after President Nayib Bukele announced the plan at the BTC Miami conference, only this time Bukele didn’t have to bring in 40 gun-toting soldiers to ensure legislators understood the ramifications of defying his desires.
The Associated Press found some El Salvadorans to be less than enamored with their newfound fiscal freedom. One user in the country’s fabled Bitcoin Beach was forced to pay US$3 just to convert $50 into BTC, leaving him to observe: “This is like in the banks.”
Still, the BTC community is ecstatic over Bukele’s boondoggle. The owner of a large cryptocurrency exchange claimed that “we have now what we have always needed. Real partnership with the government.” Oh, wait… that was actually Hyman Roth in Godfather II, celebrating the mafia’s coziness with soon-to-be-deposed Cuban dictator Fulgencio Battista. My bad.
The day after El Salvador’s BTC vote, the International Monetary Fund (IMF) expressed reservations about the speed with which Bukele was rushing down this path. A Latin American analyst said BTC adoption “under an increasingly autocratic regime will likely only compound concerns about corruption, money laundering and the independence of regulatory agencies.”
Other critics were more direct. David Gerard told the Associated Press that without strict oversight, BTC’s interchangeability with USD would offer “a way to clean dirty bitcoins” and make El Salvador “a laundromat for money.”
BTC’s reputation as only a couple shades below Tether in the crime-coin pantheon has been reinforced by the growing number of high-profile ransomware attacks that have forced enterprises to pay millions of dollars in BTC to retrieve stolen data and/or prevent further malfeasance within their networks.
Bukele would have proven far more astute had he bestowed legal tender status upon BSV—the real Bitcoin—which from its inception has boasted ultra-low transaction fees and quick confirmation times. BSV would offer the masses a truly workable financial alternative to the dollar, while the protocol’s eagerness to work with financial authorities to ensure regulatory compliance would have left critics a lot less suspicious about Bukele’s motives.
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