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The end of Binance could be the end of crypto

Binance Founder Changpeng Zhao pleaded guilty to money laundering violations. Credit: Getty

November 22, 2023 - 9:30am

The noose around crypto seems to be tightening. Fresh off the fraud conviction of FTX founder Sam Bankman-Fried, US attorneys plan to extract a multi-billion-dollar payment from crypto exchange Binance in return for discontinuing their criminal investigation of it. This follows reports that Binance’s CEO, Changpeng Zhao, has stepped down and will plead guilty to violating criminal US anti-money-laundering requirements.

Although crypto prices have bounced off the depths they plumbed in last year’s crash, they remain well off the highs of their peak two years ago. Even this strength is a bit of an illusion, though. The crypto market’s tenacity is sustained by a relatively small number of traders, who are sticking to their HODL mantra (Hold on for Dear Life). When there aren’t many sellers, it only takes a few bids to drive prices back up. However, signs of fresh demand are growing increasingly scarce. Meanwhile the struggles of crypto exchanges such as Binance and Coinbase are making the sector’s future look increasingly questionable.

As I have previously written, the creation of Bitcoin, the original cryptocurrency, was arguably an act of guerrilla warfare against the Western financial system. When, amid the 2008 financial crisis, asset markets crashed and the banks which had caused the turmoil looked set to collapse, many ordinary folk felt justice was being done. But the central banks rushed to the rescue by flooding the markets with cheap money, thereby boosting asset values. Banker bonuses were soon flowing again.

The public was furious, and Bitcoin’s creators channeled the rage, using a devious hack to exploit monetary policy and expose it as little more than currency debasement. By creating an asset with a fixed supply, its inventors ensured its continued inflation, since the rising supply of money would drive its price ever upwards. And sure enough, from its humble origins at a value of a few dollars, Bitcoin would eventually surge to trade for more than $60,000.

Along the way, though, cryptocurrency picked up true believers who hoped it would free the world from the bankers and no small number of opportunists looking to profit off their faith. It hasn’t always been easy to tell the difference between the two groups. Until it became apparent that he was engaged in dubious schemes, Sam Bankman-Fried convinced many that he would change the world with his “effective altruism”. Once crypto began slumping and the exchanges began stumbling, regulators who had always doubted it, whether because they suspected the entrepreneurs of dodgy dealing or merely disliked their upstart status, began closing in.

Crypto’s fundamental challenge remains. For all the promise of the myriad uses crypto might offer, from decentralising finance to lowering transaction costs, nobody has really come up with a practical use for it yet. It seems to function as a digital substitute for gold — an essentially useless asset that people hold as an inflation hedge (something which is yet to be proven). But that raises the obvious question among traditionalists: why not just stick with gold?

Crypto’s rise has tracked the last decade’s huge expansion of money supply. Now that inflation is forcing central banks to reduce that supply, speculative assets are losing their allure. That means the exchanges which live off them, like Binance and Coinbase, are themselves losing their value.

Unlike FTX, Binance may stick around for a while yet. A large transaction across its own platform earlier this week suggests it has acquired the money to pay the fine, which should enable it to keep operating. But barring a sudden reversal in Western monetary policies, the direction of travel for the crypto exchanges seems more likely down than up. And given the role it played in his fall from grace, Binance’s woes may bring Sam Bankman-Fried a little consolation.


John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).

jarapley

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Emre S
Emre S
7 months ago

Don’t know if this is deliberate ignorance of some kind but the author missing two of most important developments in the crypto world: NTFs and smart contracts
Crypto has three real-world uses.
1) Secure real-time highly available international settlement system
2) A public provable ownership register (NFTs)
3) A trustless finance system which allows entities to sign into enforcable contracts without ever knowing or trusting each other
Currently, NFTs are finding use in the gaming world for representing true ownership of game assets (which can then be sold rented etc). Trustless finance is used in distributed exchanges, creating structured finance products (e.g. leveraged staking), or even implementing game logic (e.g. renting NFTs).

Marko Domanović
Marko Domanović
7 months ago
Reply to  Emre S

It’s not deliberate ignorance. It’s paid ignoreance. This is nothing but political pamphlet, article is pure bullshit for manipulation of masses that don’t know shit about crypto.

Kgb Agent
Kgb Agent
7 months ago

zapadu je frka, navikli su na robove i ne vole kad nemaju absolutnu kontrolu nad njihovom interesnom sferom, trziste kriptovaluta ce da slome da bi napravili “red” kakav je njima potreban i da ga kontrolisu gvozdenom rukom….ovo je jos jedan nacin ratovanja…a oni prvo sravne sve sa zemljom pa “udju” sa svime sto imaju, otimaju sve sto im treba koliko god im to dugo treba….trziste klasičnih kriptovaluta na koje smo navikli ce pući…počistiće prostor , oblikovaće ga samo I jedino za “njihove” potrebe ,a pre toga će da izmuzu sto je viĆĄe “vrednosti” moguće iz postojeće situacije.
Te “ljude” neinteresuje nista i niko sem poluga za uticaj koje koriste za svoje pohlepe

učinite sebi uslugu i prodajte sve to sta imate….idite u srebro, zlato, platinu

ja razumem da nije lako poverovati u ovo…narocito od nekog u komentarima al ĆŸivi bili pa videli.

briks kad objavi zvanično svoju valutu, stvari će tada da se ubrzaju mnogo

srećno

Orlando Skeete
Orlando Skeete
7 months ago
Reply to  Emre S

Blockchains and cryptocurrencies are not the same. The former is extremely useful, the latter not so much.

Emre S
Emre S
7 months ago
Reply to  Orlando Skeete

Unless you’re referring to some non-crypto uses cases for blockchains (e.g. tamper resistant change tracking) I can’t see how the crypto ecosystem can thrive w/o the underlying cryptocurrencies which are the base layers for everything else.

Tania Castilla
Tania Castilla
7 months ago
Reply to  Orlando Skeete

Monero is extremely useful for me and a lot of other people 😉

Martin M
Martin M
7 months ago
Reply to  Emre S

NFTs are indeed an important development. The world would be a lesser place without all those pictures of bored apes.

belemo Kigigha
belemo Kigigha
7 months ago
Reply to  Emre S

Sensible opinions will always fall on deaf ears, unfortunately. The mainstream media continues churning the same worn out anti-crypto rhetoric and paid anti-shills like this author willfully ignore every single development and use-case to focus on “tweet worthy”/sensationalized events to buttress uninformed points.

Marcus Leach
Marcus Leach
7 months ago

Like everything else, Bitcoin’s price is determined by supply and demand. But what is the basis of demand for Bitcoin?
As a currency, Bitcoin is useless. Few vendors accept it, transacting in it is slow and expensive, its price is highly volatile and the touted anonymity it was supposed to give was illusory.
Bitcoin’s demand is based on those who wish to accumulate enough of it so they can manipulate its price, and those who are effectively buying it as chips to gamble with, punting on the probability of real life events that will positively or negatively affect sentiment towards Bitcoin.
Will gamblers keep playing Bitcoin? It’s high gain, high lose, which makes it an addictive game. The ability of the big holders to easily manipulate the price through fake transactions means that even when they swallow up the fish they can artificially push up the price to entice more to take the bait.
Then there is the benefit of a small coterie of powerful investors who have: hundreds of billions tied up in it, the ability to manipulate the market and the money pay off politicians and anyone else who threatens to close it down,
Bitcoin will endure just as casinos and the futures market endures. But it will endure as a form of gambling, not as a currency.
The idealism of cryptocurrency as a libertarian weapon against government and the rich and powerful is entirely dead. Paradoxically is has been co-opted the same bankers and financiers whose greed and immorality spurred its creation, and who are now enriching themselves at the expense of naĂŻve, unwary, ordinary people who aren’t aware that they are playing a rigged game.

Last edited 7 months ago by Marcus Leach
Dominic A
Dominic A
7 months ago
Reply to  Marcus Leach

As a currency, Bitcoin is useless.
What innocence is this! Crypto’s underpinnings are in crime, terrorism,tax avoidance. You could say this is worse than useless, for society, but not useless.

Marcus Leach
Marcus Leach
7 months ago
Reply to  Dominic A

Really? I would be absolutely fascinated to hear the evidence that formed your opinion that the $1.44 trillion market in cryptocurrency is based on crime, terrorism and tax avoidance rather than the billionaires, funds controlling hundreds of billions and the hundreds of millions of mugs who have put their money in to it
Perhaps you can explain why governments across the world would allow the continuance of cryptocurrencies when their “underpinnings are in crime, terrorism, tax avoidance”.

Last edited 7 months ago by Marcus Leach
Dominic A
Dominic A
7 months ago
Reply to  Marcus Leach

Illicit activity only accounts for a fraction of the whole, a few $billion, but as with other financial products, the total activity is a bloom that is rooted in seed funding/foundation of some sort, which gives credibility to the whole. I think NFTs failed in part because they were not rooted in anything real or useful, whilst cryptocurrencies are.
https://www.gov.uk/government/news/uk-leads-international-crackdown-on-crypto-tax-evaders
https://www.unodc.org/res/WDR-2023/WDR23_B3_CH7_darkweb.pdf
https://www.idnow.io/blog/how-criminals-leverage-crypto-money-laundering/

Malcolm Simmonds
Malcolm Simmonds
7 months ago
Reply to  Marcus Leach

Well said. The author has clearly formed his opinions based on little knowledge of Bitcoin, and it shows. “Whereof you do not know, thereof you should not speak”. (Roughly quoting Wittgenstein).

Martin M
Martin M
7 months ago
Reply to  Marcus Leach

That last question is easy to answer. A lot of governments have very close links to the crooks who use crypto. Even more Western governments get money from crypto crooks. I mean, how many political donations did SBF splash about in the US?

Rosemary Throssell
Rosemary Throssell
7 months ago
Reply to  Marcus Leach

Fiat money is used that for that.lol

Martin M
Martin M
7 months ago
Reply to  Dominic A

Absolutely correct. My recollection of it is that Bitcoin came to prominence because it was the payment method for the (former) Silk Road website, which enabled drugs to be purchased online.

UnHerd Reader
UnHerd Reader
7 months ago
Reply to  Marcus Leach

You can already get various Visa or Mastercard cards that will let you spend Bitcoin (or other cryptocurrencies) using contactless payments in any shop.
The idea of cryptocurrency as a libertarian weapon is dying fast – but because it’s being absorbed into the economy, not because people aren’t using it.

Marcus Leach
Marcus Leach
7 months ago
Reply to  UnHerd Reader

Quite right. Let me explain how those transactions work. The card providers takes the cryptocurrency and immediately liquidate it for real a currency that the vendor will accept..
The vendor has no interest in receiving bitcoin or any other worthless token. They want real money, and that is what the card provider gives them.

Last edited 7 months ago by Marcus Leach
UnHerd Reader
UnHerd Reader
7 months ago
Reply to  Marcus Leach

So, bascially the same way as a tourist spends their local currency in a foreign country through a credit card provider.

Martin M
Martin M
7 months ago
Reply to  Marcus Leach

The idealism surrounding cryptocurrency was always laughable. Its destiny was always to be used by crooks for crooked ends. I am in a way glad that it is now being subverted by “Wall Street Suit” types.

UnHerd Reader
UnHerd Reader
7 months ago
Reply to  Marcus Leach

why then is Blackrock & several other serious hedge funds applied (& soon to get) license to trade bitcoin & soon Eth?

Frank Odili
Frank Odili
7 months ago
Reply to  Marcus Leach

You may be in the U.S and be able to buy whatever you want with your dollar card but that’s not the case for others elsewhere..
Borderless payment systems like cryptocurrency options will revolutionize the world and reduce poverty all around. You need to see the world from the Windows of undeveloped countries, maybe then you’ll be able to understand the restrictions other citizens face trying to live a normal life of just buying and selling.

Dumetrius
Dumetrius
7 months ago

I’ve never heard of an evil geezer killing a pretty girl by coating her with crypto and leaving her in a hotel room.
So much for digital substitutes for gold then.

Last edited 7 months ago by Dumetrius
N Satori
N Satori
7 months ago
Reply to  Dumetrius

A downtick for reminding me of one of the silliest of all the James Bond movies (and there’s plenty of competition). The sort of overrated stuff that give the 60s such a bad name.

J Bryant
J Bryant
7 months ago
Reply to  N Satori

Geez, N. This is an article about economics. A sense of humor is obligatory. 🙂

UnHerd Reader
UnHerd Reader
7 months ago

the author’s claims stem either from ignorance or a calculated attempt to smear the cryptocurrency.
first of all, Bitcoin’s initial price was not a few dollars, but one cent. The Western financial system reeks of disease, printing paper money without gold back up is absurd.
The claim that bitcoin is losing value is false & misleading; any Joe Doe knows that there are 4 yearly cycles of bulls & bears. 2021 was the last bull run where bitcoin hit the ATH of 60K, followed by a bear period where bitcoin hit a low (but not lower than the last bear of 2018-19) .
The next bull run will be of epic proportions, taking into account the increasing number of new crypto enthusiasts and the pending ETF licenses (yes, traditional investment funds such as Blackrock & several other hedge funds will be trading bitcoin & possibly Ethereum in 2024) 2025 is set up to be the biggest bull run, possibly the last of its kind as regulations & traditional money will cause crypto to have a slow & steady uptrend.
The flavour of 2025 will be DEFI (decentralized finance) DEX (de-centralized exchanges) where you are the holder of your crypto, not some exchange that may (look at FTX) just take your money and declare bankruptcy.
Shido.io will be the DEX flag bearer. Shido has a myriad of utilities that will catapult it to the top of the dex food chain: Wallet/app with direct access to DEX, perpetuals. Defi aggregator & cross chain, Pools, yield farming, & staking, limit orders & P2P swaps, own blockchain in December 2023 with $0.0001 fees and 0.95 second time to finality transactions.
Send money overseas by bank, takes 3 -5 days & costs $35.00 each way.
Send ; by Crypto, its instant and costs pennies….
Mark my words: crypto is here to stay

Last edited 7 months ago by UnHerd Reader
James Jeffreys
James Jeffreys
7 months ago

Most probably have wrote this after 1929 Wall Street Crash and its failings and corruption???? Suppose it’s okay when mainstream financial markets crash???

Alex Colchester
Alex Colchester
7 months ago

So the world’s biggest Ponzi scheme is extracting ‘protection’ payments from a small-fry Ponzi scheme. Sounds about right.

Last edited 7 months ago by Alex Colchester
belemo Kigigha
belemo Kigigha
7 months ago

This is a well crafted admission of ignorance by the author.

dennis zen
dennis zen
7 months ago

Who are these small number of holders hanging on? Are black rock and grey scale among them?

Kgb Agent
Kgb Agent
7 months ago

“THEY” are clearing space from “POPULAR COINS” to make room for “THEIR COINS” ….It is all connected…dollar fall, euro…they will not care about anyone to impose their order and control everything…wait and see

Marko Domanović
Marko Domanović
7 months ago

“Crypto’s fundamental challenge remains. For all the promise of the myriad uses crypto might offer, from decentralising finance to lowering transaction costs, nobody has really come up with a practical use for it yet.find here.” Really?! If nothing else crypto is used widely on dark net, actually the best and only version of money is used there – that is Monero.

Dominic A
Dominic A
7 months ago

Indeed – and that is why the UK government is cracking down heavily on Monero, successfully leaning on trading platforms to stop trading in it.

Lakhmeer Khan
Lakhmeer Khan
7 months ago
Reply to  Dominic A

Welcome

Martin M
Martin M
7 months ago

I appreciate that this might not be a universal view, but I for my part would lose no sleep at all if the whole crypto house of cards collapsed.

Mike Wylde
Mike Wylde
7 months ago
Reply to  Martin M

I will also have a quiet chuckle to myself as well!
And, I suspect it’s when rather than if.

Lakhmeer Khan
Lakhmeer Khan
7 months ago
Reply to  Mike Wylde

That’s good

Alex Colchester
Alex Colchester
7 months ago
Reply to  Mike Wylde

I’m going to have a quiet chuckle when the housing market collapses. I might also have a little titter (secretly of course) when the stock market implodes. No doubt I will allow myself a guffaw when bond yields go parabolic. Or when the insurance industry collapses under the weight of total write-off climate change. Ah well
for all the carnage there is something exquisite about those light hearted moments of private humour.