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Today’s Stories:
After CZ Quits as Binance CEO, Richard Teng Looks Like the Heir Apparent
Binance to Make 'Complete Exit' From U.S., Pay Billions to FinCEN, OFAC on Top of DOJ Settlement
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This episode was hosted by Noelle Acheson. “Markets Daily” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl. All original music by Doc Blust and Colin Mealey.
Audio Transcript: This transcript has not been edited and may contain errors.
It’s Wednesday, November 22nd, 2023 and this is Markets Daily from CoinDesk. My name is Noelle Acheson, CoinDesk collaborator and author of the Crypto is Macro Now newsletter on Substack. On today’s show we’re talking about Binance, again, the Fed pivot, crypto markets and more. So you don’t miss an episode, be sure to follow the podcast on your platform of choice, and turn on notifications. For the Thanksgiving break, we won’t be producing a show tomorrow or on Friday. And just a reminder, CoinDesk is a news source and does not provide investment advice.
Now, a markets roundup.
The crypto market was mixed yesterday, as traders digested the FOMC minutes and the surprising Binance news – I’ll talk more about the new developments later in this episode. According to CoinDesk Indices, at 9 a.m. Eastern time today, bitcoin was trading down 1% at 36,583 dollars. Ether was trading up at 1.4%, at 2,030 dollars. Elsewhere, Binance Coin was down 9%, Avalanche and Litecoin were down 4%, Uniswap was up 9%, and Aave was up 7%. Like I said, a mixed bag.
Yesterday, we saw the minutes of the latest FOMC meeting. These are generally worth taking a look at since they give us a glimpse of what the Federal Reserve committee members are thinking, and how much consensus there is around the official interest rate policy. It turns out that there’s a lot of consensus. This isn’t a surprise – the flood of public comments from Fed officials over the past few weeks means their views are not secret.
No meeting participant thinks the central bank should be even thinking about lowering interest rates. All meeting participants agree that the Fed needs to be ready to raise rates again if inflation ticks up or proves stubborn. In other words, there is consensus that the battle against inflation is far from over, and that a rate cut is not yet on the near-term horizon.
There were some intriguing observations in the text. Several participants suggested that businesses in their region were not doing as well as some of the recent economic data might suggest. Many report lower investment and spending due to tighter credit. We could start to see more evidence of this in coming data releases, on top of the recent signs of the beginning of a consumer slowdown – I spoke about some of these in the episodes of November 15th and 17th, if you want to go back and take a listen.
Bottom line, Fed officials are aware the economy is starting to slow down, but they’re nowhere near ready to start contemplating rate cuts. Meanwhile, market expectations are still signaling the first rate cut in May, which… feels too soon.
In stocks, the main U.S. indices were weaker yesterday as investors are showing signs of nervousness about a slowing economy and Fed determination to keep rates high for a while. The S&P 500 and the Dow Jones were down around two tenths of a percent, while Nasdaq lost six tenths. This morning, futures are pointing to a more positive opening.
In Europe, the main stock indices were flat yesterday. So far today, they’re looking mixed, with the German DAX and the Eurostoxx 600 up half a percent and the FTSE 100 down a quarter.
In Asia, indices were also mixed today, with the Hang Seng flat, the Shanghai Composite down eight tenths of a percent, and Japan’s Nikkei index up three tenths.
In commodities, oil prices dropped sharply today as OPEC+ announced that the meeting originally planned for this weekend to discuss production quotas has been postponed to November 30th. Apparently, the delay was prompted by Saudi Arabia's irritation with other member countries' oil production levels, which some are taking to imply there may be more production coming than expected. Earlier today, the Brent Crude benchmark was down over 4%, trading at 79 dollars and 26 cents a barrel.
Gold rose almost one percent yesterday to just under 2,000 dollars per ounce, and today the metal is holding steady at that level.
Stay with us – after the break we’re going to talk about a big surprise in yesterday’s Binance news, and why it’s good for the crypto market.
Welcome back!
In yesterday’s episode, I talked about a Bloomberg scoop that the U.S. Department of Justice was proposing a $4 billion dollar fine on Binance for multiple infractions, including money laundering. Well, after recording, we got more detail, with some surprise elements.
It turns out that the Bloomberg report was correct. Early in the day, the DoJ scheduled a press conference to announce a cryptocurrency enforcement action, without giving any more detail other than that CFTC Chair Rostin Behnam and Treasury Secretary Janet Yellen would also be present. This sent speculation into a tailspin as to who the target could be, which pushed overall market levels down. Around mid-day, it was confirmed that the target was indeed Binance, which delivered a relief bump in prices on the assumption that there were unlikely to be any more nasty shocks this week.
Then, we got the DoJ statement. This confirmed that Binance would pay a $4.3 billion dollar fine and plead guilty. The big surprise was that Binance CEO and founder CZ was also going to pay a 50 million dollar fine, resign from the company, and plead guilty. This was unexpected because he could have instead chosen to lay low in any one of a number of non-extradition jurisdictions. Instead, he has chosen to accept sentencing. In theory, this will allow Binance to continue to execute its growth strategy with a cleaner image. CZ will retain majority ownership of the exchange, which will be allowed to continue operations.
Richard Teng, previously head of Binance's regional markets outside the U.S., takes over as CEO. He brings serious regulatory chops to the table, as he previously headed up the Financial Services Regulatory Authority at Abu Dhabi’s international financial center. He was also chief regulatory officer of the Singapore exchange SGX and spent 13 years with the Monetary Authority of Singapore. Ever since he arrived at Binance just over two years ago, he has been the grown-up at the table.
Also, Binance has to appoint a U.S. Treasury-approved monitor to oversee the exchange’s sanctions compliance. And it will pull out of the U.S. entirely, although apparently this does not affect Binance.US, which is a separate business with a money services registration.
Now, what does this mean for the crypto industry?
It’s good news, and not just because of the cleaner image that the settlement and change of leadership confers on the crypto market’s largest exchange. It’s also good news because it removes an ominous overhang, a dark cloud of regulatory risk that many feared could break Binance, which would have been really, really bad for investors, traders and savers everywhere. Binance may have had a dubious compliance and culture ethic in the past, but it is a key liquidity provider as well as the main crypto onramp for many emerging markets.
Unfortunately, none of this means that it will be clear sailing for crypto markets from here on. The SEC suit against Binance is still ongoing, as are its suits against Coinbase and now also Kraken. The DoJ apparently has some other investigations still ongoing. There could be more bad news ahead.
But one potential disaster seems to have been averted, and the industry as a whole will benefit from Binance’s clean-up. One more thing to be grateful for as we head into the Thanksgiving holiday.
Next, on a lighter note, I want to read out a post on X by Jameson Lopp which might help you over the coming days. Jameson says, and I quote:
"Don't evangelize Bitcoin at Thanksgiving dinner unless a related topic comes up, such as...
AI, taxes, energy, privacy, politics, property, freedom, capitalism, economics, technology, cost of living, interest rates, human rights, supply chains, climate change, housing market, personal finance."
End quote. I hope that was helpful. I would add that even the topic of turkey is relevant, as the country has an annual inflation rate of over 60%.
And finally, I want to express my heartfelt thanks to all of you for listening, for being part of this journey, and for helping this podcast to grow. Seriously. Thank you for your feedback, your podcast ratings, your questions and of course your downloads and listens. It means a lot, and I appreciate you all.
Even if you don’t celebrate Thanksgiving, I hope you have a great weekend!
As I said at the top, we won’t be producing an episode tomorrow or Friday, but we’ll be back on Saturday with the weekend episodes and then a regular market update on Monday.
