Life comes to you fast, they say, one day you spearhead the revelation of misdeeds. A few weeks later, you try to give reasons why your exchange hasn’t had any problems despite the talk on the street.
To put it plainly, this story is about a man in the crypto ecosystem. And his name ? Changpneg Zhao (CZ), the revered CEO and founder of the world’s largest crypto exchange Binance. CZ, as it is popularly known, was one of the first “groans” of the crises that faced the FTX Exchange in November.
By posting a tweet related to his token, the CEO of Binance announced that his company was selling all FTX Token [FTT] assets. This single announcement propelled the engine that drove the FTT to ruin and the FTX exchange to extinction.
An increase of 6.11 times the value IF BNB Reaches Bitcoin Market Cap?
CZ: The hero to admire?
During this period, many crypto enthusiasts viewed CZ as one that followed the openness and transparency advocated by decentralization. In fact, on the weeks when the FTX back and forth intensified, CZ acted passively as an adviser offering what and what not to advise.
Interestingly, few would have predicted that the man, his exchange and Binance Coin [BNB] would be defenders of themselves shortly after the contestant was wiped out.
In one of his tweets, CZ recommended that crypto exchanges should not borrow liquid or illiquid assets. At the same time, he mentioned that using an exchange token as collateral for borrowed assets was not the way to go, pointing out that BNB had never been used as collateral.
Two big lessons:
1: Never use a token you created as collateral.
2: Don’t borrow if you run a crypto business. Do not use capital “efficiently”. Have a large reserve.
Binance has never used BNB as collateral and we have never incurred any debt.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
yes, but the responsibilities are more difficult. We don’t owe anyone any loans. You can ask around.
— CZ 🔶 Binance (@cz_binance) December 7, 2022
Anyway, the Evidence of reserves published by Binace showed that the company had enough assets and had no debt.
However, a number of people were unhappy with the way CZ handled the issues with FTX. Speculation flourished around BNB’s sustenance, which could have indicated Binance’s fishing activities.
What was left to note was that BNB was the only asset that maintained a continuous gain against Bitcoin. [BTC], reaching all-time highs against the king’s coin. As of December 24, BNB had gained 36.34% against BTC in the last 365 days. This was something that many top cryptocurrencies could not boast of.
BNB push could lack clarity
The question that swirled around the community was where the request for BNB came from. Remember, one of the ways FTX supported FTT’s longevity wasn’t necessarily through retailer interest. Rather, it was FTX stock to keep the pressure on with its many large token purchases.
So the chatter was whether Binance was doing the same with BNB. Whether they did or not, the fact remains that engaging in such action was not a wrongdoing. But for “FTX supporters”, Binance’s actions would have been hypocritical if that were the case.
Read BNB Price Prediction 2023-2024
However, there are clear differences between FTT and BNB, which might tempt investors to consider the latter as a more solid option. While FTT ordinarily only acts as an exchange token, BNB powers an entire ecosystem called the BNB Chain.
Therefore, we can admit much better utility. Nevertheless, it is undeniable that BNB still relies on the Binance exchange.
Many miss this, think all “exchange tokens” are the same.
FTT is an exchange token. SOL (not FTT) is the blockchain token, SRM (not FTT) is the DEX token.#BNB has utility on Binance CEX. BNB is a native coin on two blockchains, BNB is the DEX (beacon chain), and more.
— CZ 🔶 Binance (@cz_binance) December 24, 2022
Meanwhile, Binance has recently been involved in some challenges. Some of which could put BNB and its investors at risk. One of the issues that has kept the stock market’s confidence on the verge of crashing is the audit process that Mazars abandoned.
IIn response to the collapse of the deal, CZ said auditing firms are new to the crypto accounting system. While Responding to CNBC’s Report on the Big Four Audit Firms withdraw from the audit of the firmsaid CZ,
“In fact, many of them don’t even know how to audit crypto exchanges.”
Audit issues and a pending regulatory hammer
Meanwhile, Deloitte was one of the first to audit Coinbase, meaning CZ’s opinion had no validity. The issue became even more moot as it appeared the exchange chief was avoiding traditional audits.
Throughout most of 2022, Binance has obtained multiple licenses and repeatedly communicated compliance with regulatory policies. However, the company has recently faced regulatory pressure after the US Department of Justice (DOJ) lawsuits report.
While prosecutors disagreed on what charges to bring against Binance, CZ was at risk of facing criminal charges for handling illicit funds. If the DOJ pursues the charges, not only could Binance be affected, but BNB’s position could also be at stake.
However, the Binance CEO had clashed with Reuters ahead of the December 12 report. Reply publicly to one of the stories published by the media provider, CZ posted a blog which said,
“I can live with the occasional negative news – we are focused on building and improving Binance and the blockchain ecosystem. We’re here for the long haul. It’s never about tomorrow, this year or even next year. We are building a business that we believe will last a hundred years or more.
To help a triumphant match, BNB might need…
All of these contributed to the FUD around BNB and the exchange. On the part of the non-disclosure of its physical offices, Binance addressed in the same blog. For the company, keeping its employees safe and complying with regulations was more important than public disclosure.
However, concerns remained high on Binace and Binance.FR love relationship. While CZ had clarified that the two entities operated independently, speculation remained due to the same way Sam Bankman-Fried (SBF) claimed FTX.US was solvent before backtracking.
Going forward, BNB may need more than the return of the bull market to stay on good terms with the crypto retail community. More than demand and supply, Binance might need to break out of its nonchalant attitude towards rampant negativity.
Although he showed that the exchange and his coin were solid after massive release lately. But, allowing proper auditing could be the transformation that could help weather a BNB crash like FTT’s.
As of December 24, BNB was trading at $244.74, down 64.12% from its all-time high. In terms of market value, Binance Coin held strong in fifth place at $39.15 billion. Meanwhile, CZ had come out to address FUD about the trade, noting that he could be right or wrong.
Why do people FUD about @Binance?
A few reasons (not exhaustive). Thread 1/98
— CZ 🔶 Binance (@cz_binance) December 23, 2022