Is Binance’s Settlement a Catalyst for Spot Bitcoin ETF Approval?

With the dust apparently settled in Binance’s case, crypto members are now looking for the green light on spot Bitcoin exchange-traded funds (ETFs).

Binance’s Settlement: A Quick Look

On November 21, Changpeng Zhao (CZ), Binance’s co-founder, announced his resignation as the company’s CEO following the settlement between Binance and the U.S. Department of Justice (DOJ). Moreover, Binance and CZ pleaded guilty to violating U.S. anti-money-laundering requirements and had to pay a $$4.3 billion fine.

On the day of the settlement news, Binance and CZ also welcomed the company’s new CEO – Richard Teng. Richard Teng previously served as Binance’s Head of Regional Market. CZ is still the company’s largest shareholder, but he is restricted from holding any executive positions within the company’s hierarchy.

Binance has long been a target of U.S. regulators. Investigations of the DOJ were primarily focused on potential money laundering activity and facilitation of individual trading in sanctioned countries. These were distinct from the legal lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The SEC accused Binance of offering unregistered securities and failing to register with the agency as a broker-dealer.

Tuesday’s plea deal did not encompass Binance’s settlement with the SEC. In addition to the DOJ, Binance made a resolution with the Commodity Futures Trading Commission (CFTC). The CFTC previously accused Binance of failing to implement adequate terrorist financing prevention measures and offering derivatives to U.S. traders without proper registration.

Paving Way for Spot Bitcoin ETFs?

Now with the dust apparently settled, all eyes are set on the spot Bitcoin ETFs. Many financial analysts believe that Binance’s declining dominance is a key ingredient for the spot Bitcoin ETF recipe. Travis Kling, an investment and financial expert, explained in his recent X post:

…there is no chance, and I mean zero, that this [BlackRock] ETF is approved with Binance in its current position of market dominance. If this ETF is approved, Binance is either gone entirely or their role in price discovery is massively diminished. If Binance holds on to its current level of influence, no chance this ETF is approved.

The U.S. SEC Chief Gary Gensler is reviewing multiple applications for spot Bitcoin offerings, including those from BlackRock, Fidelity, Invesco, Grayscale, ARK Invest and 21 Shares, among others.

Bloomberg ETF analysts James Seyffart and Eric Balchunas forecast a 90% likelihood that the SEC will approve spot Bitcoin ETFs by January 2024. However, it is just a probability – it is possible that the agency could find reasons to reject some or all of them.

Regardless of the landmark transition, CZ is a permanent part of crypto culture and Binance’s legacy as the crypto exchange giant remains intact. While Binance’s market dominance is unlikely to diminish in the immediate future, the recent leadership shift signals the exchange’s transition towards compliance, which is apparently in line with regulators’ expectations.