Trump defends CZ pardon, Binance denies impropriety of Trump ties

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President Trump is kinda defending his pardon of Binance’s founder, the company is denying improper links to Trump businesses, and Custodia Bank just can’t catch a break from the Federal Reserve.

• Senate market structure update
• Trump (sorta) defends CZ pardon
• Binance denies impropriety in Trump relationship
• Liz Warren to CZ re defamation suit threat: bring it
• Coinbase denies Sen. Murphy’s ‘quid pro crypto’ claims
• Custodia Bank loses appeal of Fed master account decision

With the clock ticking on 2025’s Congressional sittings, senators are redoubling their efforts to approve a digital asset market structure bill by year’s end. While Senate Banking Committee staffers from both parties recently resumed their discussions following last month’s fight over Democrats’ proposals for decentralized finance (DeFi) guardrails, they’re not the only committee that needs to get a move on.

The Senate Agriculture Committee oversees the Commodity Futures Trading Commission (CFTC), the federal agency that is expected to be handed primary responsibility for crypto oversight. However, while the Banking committee has been at the forefront of this legislative effort, the Ag committee has been largely silent at least, until now.

Late last week, Bloomberg quoted Ag Committee Chair John Boozman (R-AR) saying he and fellow committee member Cory Booker (D-NJ) are working daily to craft a bipartisan legislative proposal that they expect to release “very, very soon.” Boozman offered assurances that the Senate was “going to get [market structure] done this year,” and suggested that an Ag committee markup vote could happen before the Thanksgiving holiday (November 27).

Banking committee members haven’t been as optimistic regarding the prospects of a markup vote by Turkey Day, with some like Thom Tillis (R-NC) issuing warnings that senatorial focus could shift to the upcoming midterm elections before market structure legislation reaches a form suitable to bring to the Senate floor for a vote.

If the ongoing government shutdown wasn’t enough of a hindrance, this month’s calendar is complicated by the Veterans Day holiday, which will see senators head home for the week of November 10-14, while the Thanksgiving holiday eliminates the week of November 24-28. That leaves only this week and the week of November 17-21 in which to get ‘er done before their self-imposed deadline.

Any bill approved by the Senate will also have to secure approval from the House of Representatives, which approved its own market structure bill (the CLARITY Act) this summer and whose members had urged their Senate colleagues to simply adopt CLARITY as written in the name of expediency.

There’s also a strong push by the U.S. banking sector to use the Senate’s market structure bill to close what bankers view as ‘loopholes’ in the stablecoin-focused GENIUS Act that President Trump signed into law this summer. Last week, Sen. John Kennedy (R-LA) urged crypto execs to negotiate a compromise with bankers if they wanted to see market structure legislation progress.

But not all crypto firms appear ready to alleviate the banks’ concerns, or even take them seriously. On October 29, Faryar Shirzad, chief policy officer at the Coinbase (NASDAQ: COIN) digital asset exchange, tweeted a rebuttal to what he called the banks’ “stablecoins will destroy bank lending” narrative, a view he claimed “ignores reality.”

Shirzad linked to a Coinbase Institute document that argued in favor of companies like Coinbase offering users ‘rewards’ for holding stablecoins on their platform. The documents claims “treating this development as a threat risks misunderstanding the transformative direction of financial innovation and constraining an emerging advantage for the United States.”

The crypto sector currently needs all the help it can get, given the ongoing declines in the price of major tokens. After failing to live up to their traditional ‘Uptober’ trajectory last month, major tokens took another dip on Monday, flirting with lows they haven’t seen in months.

Trump defends CZ pardon

Trump’s controversial pardon last month of Binance founder Changpeng ‘CZ’ Zhao came up during the president’s interview for an episode of 60 Minutes that aired November 2. CZ served four months in a U.S. federal prison after pleading guilty in 2023 to violating the Bank Secrecy Act (BSA).

Asked about the pardon by host Norah O’Donnell, Trump initially claimed: “I don’t know who [CZ] is. I know he got a four-month sentence or something like that. And I heard it was a Biden witch hunt.”

Trump’s claim that he pardoned CZ despite knowing little about the man or his legal difficulties prompted widespread criticism, given that Trump publicly argued this spring that Biden’s pardons should be void because “he did not know anything about them.”

Criticism came from some unlikely sources, including Fox News host Guy Benson, who tweeted Sunday that, given the criticism that Trump and other Republicans have thrown at former President Joe Biden’s use of the ‘autopen,’ “shouldn’t this answer from [Trump] on this set of facts draw scrutiny and concern?”

O’Donnell then noted that the USD1 stablecoin issued by the Trump family’s DeFi project World Liberty Financial (WLF) enjoyed a $2 billion bump from Binance—which is majority-owned by CZ—in the months preceding Trump pardon of CZ.

The $2 billion came from MGX, a UAE-based investment fund, which made an investment in Binance comprised of USD1 rather than USD. Binance’s continued holding of that $2 billion in USD1 allows WLF to generate up to $80 million in annual interest on the U.S. Treasury bills backing USD1.

Trump told O’Donnell that “I know nothing about it because I’m too busy doing” other presidential responsibilities. Pressed further by O’Donnell, Trump said “I can only tell you this. My sons are into [crypto]. I’m glad they are, because it’s probably a great industry, crypto. I think it’s good. You know, they’re running a business, they’re not in government.”

In a transcript of a portion of the interview that was cut from the broadcast, Trump appeared to bristle at O’Donnell’s mention of “the appearance of corruption” in his pardon of CZ. “I can’t say, because—I can’t say—I’m not concerned. I don’t—I’d rather not have you ask the question. But I let you ask it.”

Trump went on to say: “I coulda walked away. I didn’t have to answer this question. I’m proud to answer the question. You know why? We’ve taken crypto—[as O’Donnell tries to interject] Excuse me. We’re number one in crypto in the whole world. Other people wanna be. They’re fighting like hell to be. But we’re number one in crypto because I’m the president … We are number one in crypto and that’s the only thing I care about. I don’t want China or anybody else to take it away. It’s a massive industry.”

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Binance denies Trump-related impropriety

Last week, Binance’s U.S.-facing operation Binance.US announced it would start accepting USD1 deposits, prompting Sen. Chris Murphy (D-CT) to tweet that the White House is “a full time, 24/7 corruption machine.”

On October 29, the Wall Street Journal issued a report detailing how, following Trump’s election victory in November 2024, Binance “formed a high-level task force to strike a deal with [WLF] that Binance could leverage into clemency for Zhao.” Binance execs were reportedly inspired by Tron founder Justin Sun’s $30 million purchase of WLFI but ultimately chose a different way ‘to move money into the Trump family company.’

The WSJ’s sources claimed that Binance “deployed a team of over a dozen engineers to build the technology behind” USD1 prior to its launch this spring. This team included Binance’s Hong Kong-based ‘stablecoin chief.’

In October 2024, WLF hired Rich Teo, a close friend of CZ and co-found of Paxos, which issued the Binance stablecoin BUSD before it was shut down by New York regulators in February 2023.

The WSJ also reported that it was Binance that requested the $2 billion investment it received from MGX “be paid using USD1.” A Binance attorney said the company “did not control the stablecoin chosen by MGX” and said neither Binance nor CZ ‘acted as a relationship facilitator or financier’ to WLF.

WLF spokesperson Gail Gitcho told the WSJ that Binance supplied WLF with smart contracts to govern USD1’s operations “to save WLFI the headache of reproducing them, but not in exchange for anything.” Gitcho denied that Binance arranged the use of USD1 in its MGX deal and that “CZ has never given [WLF] a single dollar.”

Last week, Rep. Sean Casten (D-IL) told Politico that, should the Dems ever retake the House, the party could seek to impeach the president, who Casten claims “commits impeachable offenses on a daily basis.”

Casten called Trump’s pardon of CZ “straight pay to play,” and said the rest of the world now understands that “if you want to influence the foreign policy of the United States, you can put money in Trump’s crypto ventures. The family gets money, and then you get whatever you want.”

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Liz Warren to CZ: bring it

Meanwhile, Sen. Elizabeth Warren (D-MA) is showing no signs of being cowed after CZ’s attorney Teresa Goody Guillén threatened to sue Warren for defamation last week. The threat came after Warren tweeted the incorrect claim that CZ had pleaded guilty to “a criminal money laundering charge” rather than violating the BSA.

Warren’s tweet remains online and Warren’s attorneys sent Guillén a letter in which they claim Warren’s tweet “is true in all respects and therefore cannot be defamatory … the ‘charge’ referenced in Senator Warren’s X post refers to the ‘charge’ to which Mr. Zhao pled guilty and as to which President Trump had just pardoned him. The law Mr. Zhao pled guilty to violating is an anti-money laundering law. All of this is public record, and is plainly what Senator Warren’s X post concerned. Simply put, any threatened defamation claim would be without merit.”

Warren’s attorneys note that Guillén claimed Warren’s comment “falsely imputes criminal conduct” on CZ’s behalf, as Guillén states that CZ “pleaded guilty to a single regulatory count.”

Warren’s attorneys profess to be “confused by the assertion,” noting that CZ’s “public plea agreement sets out the provisions to which he pled guilty, including 31 U.S.C. § 5322, which is titled ‘Criminal penalties.’ … Mr. Zhou [sic], then, did plead guilty to a criminal violation of the Bank Secrecy Act—described by its enforcing agency as ‘our nation’s first and most comprehensive anti-money laundering statute.’”

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Coinbase denies quid pro quo

Also expressing outrage over perceived ‘quid pro crypto’ activity is Coinbase, which took exception to Sen. Murphy’s October 30 tweet describing how “Trump’s corruption factory works.”

Murphy’s tweet cited Coinbase’s tens of millions of dollars in political action committee (PAC) spending, which Murphy claims is used to “help Trump allies.” Murphy added that Coinbase cut a $1 million check to Trump’s inauguration fund, after which the Securities and Exchange Commission (SEC) dropped its civil complaint against Coinbase, and then Coinbase cut another check to help fund construction of Trump’s new White House ballroom.

Murphy’s tweet brought pushback from Coinbase’s policy man Shirzad, who tweeted that Murphy’s claims were “ridiculous.” Shirzad called the Coinbase-funded Fairshake PAC “non-partisan,” as it “supported multiple Democrats, including 3 of your new Senate D colleagues.”

Shirzad questioned Murphy as to whether he’d previously objected to other corporate contributions to presidential inaugural committees. Shirzad also defended Coinbase’s ballroom funding and claimed the “current SEC’s decision to drop the case was the right decision on the merits,” given the suit was “part of a grotesque pattern of bullying and abuse of power by the previous [SEC] chair.”

Murphy responded to Shirzad by saying “I know it’s your job to argue this isn’t pay to play, but if this isn’t, what is? You think the Binance deal (help launch his crypto coin and get a pardon for terrorism and sex predator financing) is on the up and up? I don’t need to hate your industry to think this all stinks.”

Crypto/political commentator Adam Cochran also weighed in, warning Shirzad that Coinbase’s deep-pocketed embrace of Trump is “going to make it harder to get reasonable bipartisan legislation and risk the pendulum swinging back too far in the other direction during the next administration.” Cochran warned that “no one externally sees [Coinbase] as solely neutral and non-partisan anymore and if that trend continues it could be one that bites us all in the ass.”

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Custodia appeal falls on (mostly) deaf ears

In slightly less controversial news, a three-judge panel of a U.S. federal appeals court has upheld the Federal Reserve Board’s rejection of Custodia Bank’s application for a master account. Custodia holds special-purpose depository institution (SPDI) status in Wyoming but this doesn’t grant it access to the Federal Reserve System.

At the time of that May 2023 rejection, the Fed cited Custodia’s desire to “engage in novel and untested crypto activities” that it felt “are highly likely to be inconsistent with safe and sound banking practices.” In March 2024, the U.S. District Court in the District of Wyoming rejected Custodia’s challenge of the Fed’s decision, saying it was within the Fed’s discretion to deny Custodia this privilege.

In the U.S. Court of Appeals for the Tenth Circuit’s October 31 ruling, a majority of the panel concluded that “the plain language of the relevant statutes grants Federal Reserve Banks discretion to reject master account access requests from eligible entities and, therefore, we reject Custodia’s attempt to impair the Fed’s ability to safeguard our nation’s financial system through the exercise of discretion to reject master account access.”

Dissenting from the majority was Judge Timothy Tymkovich, who claimed that “by denying Custodia a master account, the Kansas City Fed has unlawfully denied it access to those services which are vital to its business. That, it cannot do.” Tymkovich added that “by claiming unreviewable discretion over access to the nation’s financial system, the Fed has gone too far.”

Custodia issued a statement saying that while it had hoped for a win, “we received the next best thing—a strong dissent.” Custodia said it “has an option to petition for a rehearing by the Tenth Circuit, and we are actively considering that.”

That effort might not be necessary. Last month, Federal Reserve Gov. Christopher Waller unveiled his concept of a ‘skinny master account’ for blockchain firms that “may not want or need all the bells and whistles of a full-fledged master account.” Whether Custodia would accept this ‘skinny’ option, or whether it wants to exercise its legal options to prove its original point, remains to be seen.

TD Cowen analysts called the ruling a “speed bump rather than a road block” for crypto firms seeking master accounts, noting that the Trump administration favors the merging of crypto and traditional finance, and thus it’s “hard to see how it does not happen.” The analysts suggest the Fed will put forward a concrete proposal for its ‘skinny’ account plan “in the coming months.”

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