The Rise and Fall of Binance: A Story of Disruption and Heavy-handed Enforcement
The explosive growth and success of Binance, the global cryptocurrency exchange, has shaken the foundations of traditional financial and political establishments. Former BitMEX CEO Arthur Hayes recently shed light on the heavy-handed enforcement actions taken against Binance, following its admission to violating US laws related to money laundering and terror financing. In a lengthy Substack blog, Hayes delved into the recent $4.3 billion settlement paid by Binance.
A Global Powerhouse
Since its inception in 2017, Binance has emerged as the largest exchange by trading volume, challenging the status quo of the financial industry. Hayes points out that Binance would also rank in the top 10 traditional exchanges based on average daily volume, highlighting its growing influence on a global scale. According to Hayes, this posed a problem for the financial and political establishment, as blockchain intermediaries like Binance were not controlled by traditional players.
Hayes emphasizes that Binance played a pivotal role in empowering everyday individuals to own intermediaries and cryptocurrency assets without relying on traditional institutions. He states, “Never before had people been able to own a piece of an industrial revolution in under ten minutes via desktop and mobile trading apps.”
Absence of Accountability
In his blog, Hayes draws attention to the lack of accountability faced by mainstream banking and financial institutions in various high-profile scandals and the 2008 global financial crisis. In contrast, he highlights the stringent treatment of Binance and its founder CZ by the US Department of Justice. Hayes deems this treatment absurd and indicative of the arbitrary nature of punishment imposed by the state.
China’s Influence on Bitcoin
Hayes further explores the current state of the US and Chinese economies and the potential for massive capital inflows into Bitcoin. He suggests that Chinese state-owned enterprises, manufacturers, and investors may begin investing capital offshore due to the lack of attractive domestic returns. Hayes quotes Peking University professor Michael Pettis, who argues that China cannot profitably absorb more debt, leading to capital being redirected to global markets.
With the recent approval of licensed cryptocurrency exchanges and brokers in Hong Kong, Chinese companies and individual investors now have a means to purchase Bitcoin. Hayes posits that Chinese investors, familiar with Bitcoin’s potential as a store of value, will seek to invest in the asset. He states, “If there is a way to legally move cash from the Mainland to Hong Kong, Bitcoin will be one of many risk assets that will be purchased.”
The Rise of Hard Monetary Assets
From a macro perspective, Hayes argues that China’s increased availability and affordability of Yuan-based credit may lead to a decrease in the price of Dollar-based credit. As a result, fixed supply assets like Bitcoin and gold may rise in dollar fiat price terms. Hayes predicts that the fungible nature of global fiat credit will drive dollars into hard monetary assets like Bitcoin.
In conclusion, the rise and success of Binance have disrupted traditional financial and political establishments, leading to heavy-handed enforcement actions. The potential capital inflows from China into Bitcoin further highlight the growing importance of cryptocurrencies in the global financial landscape.
