Zhao Changpeng's countdown to release from prison, is Binance trying to turn the tide?

Author: Tuo Luo Finance

That man is back.

Last week, according to the U.S. Bureau of Prisons website, CZ, who has been incarcerated for nearly four months, is set to be released on September 29. The latest news indicates that after 118 days in Lompoc Federal Prison, CZ has left prison and has been transferred to the Residential Reentry Management Office (RRM) in Long Beach, where he is currently still in custody.

Following this news, the market has shown excitement, with Binance's new coins once again surging to the top of the charts in anticipation of the spiritual leader's return, and positive voices on platform X are incessant.

After all, the currently relatively sluggish market really needs a shot in the arm.

To recap, back in November last year, Binance reached a resolution with the U.S. Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC), the Office of Foreign Assets Control (OFAC), and the Financial Crimes Enforcement Network (FinCEN) regarding investigations into Binance's historical registration, compliance, and sanctions issues.

CZ ultimately admitted to violations of the Bank Secrecy Act, the International Emergency Economic Powers Act, and the Commodity Exchange Act, among others, for conducting unlicensed money transfer operations, conspiracy charges, and prohibited trading, and paid a staggering fine of $4.368 billion, setting a record for the largest fine ever imposed by FinCEN.

The initial expected sentence was 18 months, but the DOJ later sought to increase it to three years. However, after considering 161 letters of support and the voluntary plea, in April of this year, CZ was ultimately sentenced to four months in prison, officially starting his sentence in June, with an expected release date of September 29.

Four months in prison is not actually that long, but since November last year, Rachael Teng has officially become the new CEO of Binance. During this nearly year-long power transition at Binance, the challenges and opportunities have been vividly reflected.

From an opportunity perspective, CZ's departure officially opened the door to a major compliance era for exchanges and the crypto space, signaling the formal end of the wild west. Compliance for exchanges has become an inevitable trend, and it was after this that the Bitcoin ETF officially brought institutions into the crypto space. Thanks to CZ's dramatic exit, Binance was able to shed its historical burdens and gain a better foothold in the market under the banner of compliance.

Rachael Teng's rise to power is based on this, as a professional manager with a complete political and business background can better lead Binance in achieving global compliance. Following this trend, although there are currently no plans to return to the U.S., Binance has already obtained 19 licenses globally, and this year has newly acquired compliance licenses in Thailand, India, and Brazil, with achievements in compliance direction being evident.

Initially, the market doubted that CZ's departure would affect Binance's operations, but looking at the data, Binance's performance over the past year has remained quite impressive. Coingecko shows that Binance's daily trading volume has remained relatively stable, ranking first among all exchanges in 24-hour trading volume, with monthly active users reaching 530 million. According to DefiLlama data, from the end of November last year to now, Binance has seen a net inflow of over $4 billion, firmly holding its position as the leading exchange. Just recently, Rachael announced that Binance's historical trading volume surpassed $100 trillion in early September.

Overall, after leaving the strong support of the patriarch, Binance seems to have delivered a pretty good performance, but on the other hand, new crises are slowly approaching.

In terms of compliance, earlier this year, Nigeria dealt a heavy blow to Binance, announcing in February that Binance was suspected of conducting illegal financial transactions on its platform, and later accusing Binance of exacerbating the collapse of its national currency. Rumors even circulated that authorities wanted to impose a $10 billion fine on Binance. Although this rumor was later debunked, Nigerian authorities still detained Binance executives Tigran Gambaryan and Nadeem Anjarwalla under various pretexts, and to this day, the feud between Binance and Nigeria has not been resolved, with Gambaryan still not released.

On the other hand, the whirlpool of public opinion has never left Binance.

At the end of last year, due to unsatisfactory new projects on Launchpad, Binance faced accusations of "friendship coins," claiming that the Hooked Protocol, which had unclear product attributes, low recognition, and limited team experience, was only able to conduct an IEO due to the friendly relationship between Primitive Capital's Dovey Wan and He Yi. In April, after the IEOs of Space ID and Open Campus, this rumor intensified, with users on X even sarcastically claiming that Binance had a friendship coin section. At that time, He Yi responded that Binance absolutely did not have a friendship coin section, and earlier this year, CZ outlined three key directions for Binance's 2023 planning, with education being the top priority, followed by compliance and product services, which gradually quelled public opinion.

If the friendship coin issue was merely a small circle of disputes, it wasn't long before high FDV tokens followed, sparking a major debate in the entire crypto market. First, Tradetheflow released a chart pointing out that the performance of tokens listed by Binance in the past six months was generally poor, with many being halved shortly after listing, all sharing significant high FDV characteristics, leading to debates between Dragonfly and a16z regarding MEME and VC tokens. In this context, Binance was accused of frequently listing tokens that drained market liquidity, leading to the decline of altcoins, while only serving VC tokens, deviating from community interests and becoming accomplices in harvesting retail investors, prompting a swift backlash from the market.

On May 20, Binance's public relations team acted promptly, announcing a public recruitment plan for listing projects. According to the announcement, tokens launched with high valuations and low circulation models would lead to significant selling pressure upon future unlocks, and such market structures are detrimental to ordinary investors and loyal community members of projects. To cultivate a healthy industry ecosystem, Binance will first support small and medium-sized cryptocurrency projects.

On June 16, He Yi also responded to FDV and friendship coins during a community AMA, stating that the anti-VC wave and the popularity of memecoins reflect a lack of quality assets in the market, and expressed hope that more projects with real business models would be built on the blockchain rather than remaining in abstract concepts, admitting that there was insufficient investigation when launching Hook.

In fact, after this, Binance has been cautious about launching VC tokens, with the frequency of high FDV tokens being significantly reduced, and it has begun to align with community-favored MEME tokens and the currently popular Ton ecosystem. Following the first shot fired by NOTCoin, DOGS quickly followed, and Hamster and Catizen were also launched on Binance. As of now, Binance has listed six tokens related to the TON ecosystem. However, this move has sparked dissatisfaction within the community, pointing out that Binance's logic for listing tokens is unclear, shifting from application value to traffic value, and that the purpose of listing tokens for quick profits lacks industry integrity. The dispute over the size of Nerio further fueled the controversy, with Binance becoming a focal point of criticism for listing projects with a market cap of less than $20 million, with accusations of market manipulation resurfacing and complaints about insider trading becoming rampant.

In the face of various criticisms, He Yi has once again sought to stabilize the situation, not only writing a lengthy response but also explaining the current listing process and the four major listing standards, humbly stating that "he is not necessarily right."

Interestingly, throughout the various whirlpools of public opinion, the core reason seems to be Binance's innovation. In the current market environment, Binance hopes to seek change while maintaining stability to expand its sectors and gain a larger share. However, it is precisely due to seemingly reckless innovations and the unsatisfactory performance of new tokens that it has been repeatedly accused of losing its original intention and vision, while He Yi's repeated responses have been criticized as overly active and not resembling a captain.

Ultimately, in the eyes of users, Binance is still the Binance led by CZ, and the rapid growth during the industry's boom has dulled users' tolerance thresholds. Users are accustomed to the founder's silent working style and hope that Binance will lead crypto growth and innovation as an industry benchmark.

However, it is worth mentioning that the current market environment is vastly different from before. In the past two years, not only has the compliance sword been hanging high, but the entry of Wall Street institutions has added uncertainty. The crypto market is no longer centered around exchanges as the absolute authority, while primary market investment institutions are facing a winter, highlighting a lack of market liquidity, and innovative applications are few and far between. PvP has become prevalent, leaving only MEME thriving, and even project operations and promotions have appeared in entirely new ways at major events. All of this reflects that the industry has entered a reshuffling period, and exchanges can no longer wear the cloak of faith, finally arriving in the world in their original commercial form.

It is against this backdrop that the market holds high expectations for CZ's return, hoping that he can once again lead the crypto space through the storm to find a new direction. However, it should be emphasized that as part of the plea agreement, CZ will be prohibited from participating in the company's daily operations for three years. Of course, his equity in Binance remains real and valid, so it is still feasible for him to monitor the company's performance as a shareholder or to replace or nominate new board members or a new CEO.

However, due to CZ's status at Binance and the presence of co-founder and partner He Yi, it is highly likely that he will participate in company operations in other forms. But given that the two external supervisors appointed through the plea agreement will also closely monitor similar situations, it can be anticipated that CZ will mostly guide company operations indirectly.

As early as after reaching the plea agreement, CZ had expressed no intention of serving as any form of CEO, focusing instead on investing in blockchain, artificial intelligence, and biotechnology companies. The non-profit project Giggle Academy, which CZ had previously engaged in, has stalled since his incarceration, and the market can look forward to the subsequent progress of this project.

Can CZ turn the tide? From the current market situation, the challenges are numerous, as this is a market issue that cannot be solved by a single individual. In other words, CZ is someone who has climbed to the top from the old era, and the old narrative has now lost its strength. But fortunately, new flows are still pouring in, with younger and more creative groups entering the crypto space. In this time of change, how to embrace and value new groups and new logic may be the next challenge that the legendary CZ needs to address.

On the other hand, regardless of the circumstances, CZ's return is still a significant boon for Binance, and the boost to user sentiment will have a positive effect. It is highly probable that Binance's series of tokens will see a surge, and some individuals in the market have already begun to target the so-called CZ release concept.

This shows that although the market is no longer the same market, CZ is still that CZ.