After the series of collapse and bankruptcy issues in the second to third quarter of 2022, the crypto world would have thought that it was the worst that could happen. Unfortunately, it wasn’t, and the incoming storm would be greater than that which had been survived. 

Who would have imagined that a crypto exchange with one of the highest trading volumes would be involved with misuse of customer funds? Well, that was the story of FTX, and its sister trading venture Alameda. The crash of the exchange ensured that billions of dollars left the crypto market and customers were left hanging, not knowing where their deposits had gone. But that may not be the end of what is to come especially as Binance is now faced with its own challenges.

No, the world’s largest exchange has not been accused of using customer funds for trading. However, there could be much more troubling issues for the exchange. You would recall that its CEO, Changpeng Zhao (CZ), was one of those who dropped the bombshell on FTX. Now, the Securities and Exchange Commission (SEC) is on Binance’s heels. This has led to discussions if the exchange would follow in the footsteps of its former competitor.

The case the SEC has against Binance is one of money laundering and similar to that of the Tornado Cash sanction. For CZ,  the regulatory authority was just witch hunting it rather than bringing up a solid case against it. Nevertheless, that is not the major concern of participants in the market. 

The primary issue is that Binance has established itself as the platform dominating the market. This is the same way users who prefer to link with brokers have selected Bitcoin Loophole as the go-to platform. So, there is a chance that if the exchange goes down, the whole market could be liquidated. But it seems that Binance in fighting back and trying to regain trust in the market. So how exactly is the exchange doing it?

Solid with the Proof-of Reserves

Let’s take a look at the FTX issue. After the exchange collapse, the majority of the investors in the market doubted other exchanges and many took their assets into self custody. However, Bianance, through CZ, was the first who offered a Proof-of-Reserves process. 

This process involves a public display of assets owned and owed by every exchange.  Data from the Binance reserves showed that it had enough assets to protect its users and had zero debt. Other exchanges followed in the footsteps. Still, eyes were not done with Binance as many demanded an audit.

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The exchange accepted to have an auditing firm evaluate its health. While a couple of the “big four” declined to audit Binance, Mazars took the mantle. However, the challenge would only last a few days as the company would later terminate the deal. In its defense, Binance CEO, CZ, said audit companies were still new to the process of auditing crypto firms. Meanwhile, Deloitte has been auditing Coinbase for a while. This comment raised eyebrows and some linked it to the way Sam Bankman-Fried of FTX responded when accused. So, is Binance, and its exchange coin Binance Coin [BNB] safe from possible capitulation? Here’s what we know.

Will BNB Avoid Being a Victim?

As of this writing, BNB was only acting in line with the bear market conditions, and nothing unusual has happened to its value. According to CoinMarketCap, BNB was still the fifth-ranked cryptocurrency with the highest market capitalisation. In terms of its performance, the price tracking platform showed that BNB gained 10.29% in the last seven days. However, its 30-day performance amounts to 4.67%. Nevertheless, it remains the most valuable cryptocurrency linked to an exchange. Even the FTX Token [FTT] could not match up to it before its demise.

Furthermore, Binance troubles is not over. At some point, the exchange halted transactions in USDC, the stablecoin linked to Circle. This move sent panic around the market. However, the exchange clarified that it was only putting its own stablecoin, BUSD, first over any other. 

Meanwhile, the SEC is still not done with its investigation. In addition to that, it may want to block all roads that lead to Binance. This is evident in the way the regulator has been acting in Binance’s mission to acquire Voyager Digital.  Despite the back and forth, it is unlikely that the Binance exchange falls to its knees. At the same time, the exchange might need to exercise caution with the way it operates and interacts with the regulators. 

In addition, the exchange has been accused of aiding a drug cartel in making their transactions. This was because the US Drug Enforcement Agency (DEA), as reported by Forbes, said that illicit funds between $15 million and $40 million dollars were laundered using the platform. However, the country’s Department Of Justice (DOJ) was at crossroads about the prosecution of Binance. The crypto community would, however, hope that nothing negative befalls the exchange. It is even more surprising that the exchange had maintained its ground and stayed solid after outflows of about $6 billion. So, there is a high chance that it does not have the internal problems FTX faced. Instead, it was at risk of facing a regulatory hammer.

In spite of the challenges, Binance was still making updates to its exchange for users to be able to navigate it seamlessly.

With all of these, Binance may not follow in FTX’s path to extinction. This is due to the way the exchange has responded in the face of Fear, Uncertainty, and Doubt [FUD]. At one point, it looked like some influencers did not like the role CZ played in the FTX exit. This led to a bit of “targeted harassment” which seems to have subdued. Still, it does not mean that Binance has overcome all its challenges. For its coin, BNB, it has proven that it is stronger than FTT, and the reasons are not far-fetched. BNB is not just an exchange coin but it also has incredible utility while FTT was only backed by the volume pumped into it by FTX.

As one of the coins that produced the most profits in the 2021 bull market, BNB’s stance showed that it has the capability to remain relevant for years to come. However, this is subject to investors’ interest in it, and Binance’s ability to help it and the Binance Smart Chain (BSC) stay relevant. Going forward, Binance may need to be careful with its public announcement, and the way it deals with regulators. In addition, it also needs to examine the irregular activities going on on its exchange if it wants to avoid going down like FTX.