DOJ officials hesitant to prosecute Binance for fear of crypto exchange run
Christopher Hutton
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Officials from the Department of Justice are considering charging the major cryptocurrency exchange Binance with fraud, but they are worried that the charges could cause a run on the exchange and cost consumers a lot of money.
The prosecutors are worried that if they charge Binance, it could create a similar response as what happened to FTX, according to Semafor. The officials are considering other mitigating options, including fines and deferred or nonprosecution agreements. It would be a compromise compared to the handling of FTX with the hope of holding the exchange culpable for criminal conduct while reducing consumer harm. The compromise would also appear to confirm that Binance has become too big to fail or to prosecute.
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The decision process becomes more complex as regulators have to figure out the best way to regulate the cryptocurrency industry, which is in a legal gray area with fewer restrictions than traditional investments. It also has to manage the possible financial risks to cryptocurrency investors, who lack the other protections that investors in traditional securities have.
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Binance and its founder Changpeng Zhao are facing charges from the Security and Exchange Commission and the Commodity Futures Trading Commission over mishandling customer funds and flouting trading laws.
Key members of Congress have tried to advance legislation to implement additional regulations for stablecoins and cryptocurrencies. The House Financial Services Committee approved legislation on July 30 that would establish a regulatory framework, require cryptocurrency companies to register with the SEC or CFTC, and make them adopt a series of protocols that would classify their tokens as commodities rather than securities. It can now be considered on the House floor after the August recess.