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Recent developments surrounding leading cryptocurrency exchange Binance have set discussions about the United States’ regulatory stance on cryptocurrency firms once more.
Omid Malekan, author and professor at Columbia Business School, argues that the United States Department of Justice’s handling of the Binance case is significantly different from traditional finance practices:
“People who sincerely believe that crypto is some unique enabler of bad people doing bad things don’t understand how the rest of the financial system actually works.”
He also highlighted that even if institutions adhere to Anti-Money Laundering (AML) protocols, they could still inadvertently process significant amounts of illegal funds, saying that such actions are “considered OK” if the paperwork is completed.
Malekan: Traditional firms do not face scrutiny like cryptocurrency firms
Malekan says that if Wall Street faced similar scrutiny to Binance, numerous managing directors could face legal repercussions, saying:
“If they’d been held to the Binance Standard there’d be hundreds of managing directors in jail and less money for shareholder buybacks (or lobbying). But the bankers were smart enough to never question the game.”
In his note, Malekan applauds Binance in how it has managed to foster financial inclusion, onboarding millions of individuals who are often underserved by compliant financial institutions. He suggests that Binance achieved what traditional firms have chronically failed to do, to “bank the unbanked”.
He did note that he believes that Binance was in the wrong for deceiving customers and failing to comply with regulations. The exchange recently settled with the United States government for allegedly enabling the movement of “stolen funds.” As part of the settlement, CZ stepped down as CEO. The Department of Justice is currently driving action to pin him as a flight risk, asking the Court to ban him from returning home to the United Arab Emirates to await court proceedings in February 2024.