The news: Following the arrest of former FTX founder Sam Bankman-Fried (SBF), Binance, the largest crypto exchange in the world, experienced an influx of withdrawal requests from nervous investors.
Normal market behavior: At one point during this week, the exchange handled over $3 billion in withdrawals over a 24-hour period. But it wasn’t enough to spook Binance CEO Changpeng Zhao (CZ).
Taking cues from FTX: All eyes in the crypto world are on SBF and FTX due to the Securities and Exchange Commission (SEC) charging the disgraced founder with defrauding investors. Binance will likely be a keen observer, as it knows this will intensify scrutiny of the crypto behemoth.
At the very minimum, Binance should be taking note of FTX’s shortcomings and work to shore up its own governance controls, if necessary. It’s still unclear if the FTX collapse will expedite any charges against Binance executives, but the firm should prepare for questions and reviews from regulators.
The ultimate reckoning: The withdrawals at Binance are causing the crypto community to speculate on what would happen if the crypto giant were also to fold.
The big takeaway: As of now, a Binance collapse isn’t impending. But the FTX scandal is providing a valuable opportunity for the exchange, and any other crypto firms, to learn about the controls and risk-mitigation tools they should have in place to appease regulators and keep investors safe. It’s also giving a lesson on how cooking the books, or not keeping a book at all, doesn’t make for good reading.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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