The U.S. Commodity Futures Trading Commission (CFTC) could require Binance to cease operations in the U.S. as part of a potential settlement, Bernstein said in a research report on Tuesday.
The Bernstein report comes after the regulator sued the crypto exchange and its founder Changpeng Zhao for allowing U.S. citizens to trade derivatives and for willful evasion of the country’s laws.
The CFTC is charging Binance with violating laws around futures offerings, illegal off-exchange commodity options, failing to register as a futures commissions merchant, designated contract market or swap execution facility and other charges related to its know-your-customer (KYC) or anti-money laundering (AML) processes.
Binance.US is a minor part of the overall business and makes up less than 5% of the exchange’s global operations, the report said.
Given that cryptocurrency trading is a global business, Bernstein expects that Binance will look to “safeguard its dominant international business, which is its cash cow, and where it has worked on licenses in Europe, Africa and Australia,” analysts Gautam Chhugani and Manas Agrawal wrote.
The broker says this latest enforcement is not “material to overall crypto markets” as Binance.US operations are not material, and it doesn’t expect this news to trigger a large selloff in the market, as the “regulatory narrative” has pivoted from the U.S. to expected Hong Kong and China flows. The Hong Kong retail crypto market is expected to open as of June 1.
Bitcoin (BTC), the largest cryptocurrency by market cap, was trading 2.8% lower at $27,047 at time of writing.
Bernstein says it continues to expect Hong Kong and China regulatory positives to offset the negative headlines emanating from the U.S. markets, until there is a regulatory shift in the U.S.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.