The exchange has attracted the attention of regulators looking to impose some control over the crypto sector. Earlier this year, the Commodities and Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC), two US regulatory bodies, filed civil lawsuits accusing Binance of a laundry list of improprieties, including commingling customer assets, anti-money laundering violations, and artificially inflating trading volumes.
Staff at Binance have been braced for criminal charges against the firm, according to one former employee, who asked to remain anonymous for fear of retaliation. The apparent confirmation that the DOJ is preparing criminal charges will do nothing to dampen the “concern and anxiety” inside the company, which began in the summer when it started to conduct large-scale layoffs and eliminate various perks and benefits, says the former employee, who departed the company earlier this year. Even though there are no signs that the company is in any immediate financial danger, there is a “general sense of doom” at Binance, the ex-employee says.
If the US were to impose criminal sanctions on Binance, says Jacob Silverman, author of Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, it would “cause banks to retreat,” effectively choking the exchange by impeding its ability to accept regular currency from customers. “For all crypto companies, banking access and access to dollars is a perpetual challenge—and an imperative.”
Even offshore banks would have to fall in line, says Stephen Diehl, a crypto skeptic commentator. “The US dollar is the world’s reserve currency … Banks are highly reliant on [dollar] flows from the US,” he says. “If it comes down to jettisoning Binance as a client or continuing to do business with the US, it won’t be a difficult decision to make. Even the Bank of China is reliant on foreign dollar reserves.”
If Binance were to fall as a result of criminal proceedings brought against it, it would deal extensive damage, says Silverman, particularly to regular people’s appetite for dealing in cryptocurrencies. “If FTX wasn’t the end of consumer crypto as we know it, the collapse of Binance definitely would be,” he says. “It’s one of several pillars holding up the consumer crypto market—and certainly the most important one.”
