Unease rises around the dominance that Changpeng Zhao’s Binance maintains in the cryptocurrency market. Especially now that Sam Bankman-Fried’s fall from grace is finalized. Accounting firm Mazars Group halted Binance and other crypto businesses on Friday. Their reports unveiled the indications that the companies did not have the necessary reserves to absorb any possible increase in client withdrawals.
Zhao, who goes by the initials CZ, has said multiple times that Binance does not exploit customer money as FTX did. He adds that his exchange can handle whatever amount of requests comes its way. Binance has a more extensive history than FTX, indicating that it has been able to withstand previous “crypto winters.” Latter include a loss of more than 80% in Bitcoin from December 2017 to the end of 2018.
Despite that, it’s been a challenging few days. Mazars’ action may endanger an accounting picture that many people had already found murky. Most likely, the market’s lack of trust in Mazars’ “proof-of-reserves” statements prompted the firm to halt all such operations. CZ was peppered with questions about Binance’s financial strength during a televised interview earlier this week. He gave critics fresh material for another round of mockery.
Binance’s concentration of power goes against the philosophy of the industry as a whole – decentralization
In the aftermath of FTX’s demise, Binance’s market leadership doesn’t sit well with an industry that promotes decentralization. Even for those who ostensibly support CZ and his exchange. CZ’s firm last week saw a drop in cryptocurrency prices as a result of news about his firm. This adds to worries that Binance has become a “too big to fail” company in a market where there is no one to stop or soothe any contagion.
Tennessee Senator Bill Hagerty observed the Binance dominance at a Senate hearing on FTX on Wednesday. He insisted that a hypothetical CZ implosion would be “catastrophic for the cryptocurrency industry. Additionally, it would be catastrophic to all of the consumers who use the industry.”
Binance CEO Chang Zhu has said in tweets and interviews that no amount of client departure will put the firm under duress. Last week, amid a crush of client withdrawal requests, that confidence was put to the test. Binance’s BNB, the exchange’s native token, has seen a sharp drop of 20% since last Monday.
