Binance, CZ paid to challenge the financial and political situation – Arthur Hayes

The explosive growth and success of Binance outside of traditional financial and political control has led to tougher enforcement measures against the exchange, said former BitMEX CEO Arthur Hayes.

Hayes delved into the $4.3 billion deal paid by Binance in a lengthy Substack post. This comes after the exchange and its founder, Changpeng “CZ” Zhao, admitted to violating US laws on money laundering and terrorist financing.

As Hayes noted, the CZ Global exchange became the largest in terms of trading volume in the six years since its launch in 2017. The former CEO of BitMEX noted that Binance is weighed on average by 10 traditional exchanges daily, which is indicative. The growing influence at the international level.

“The problem with the financial and political establishment was that they weren't leading the middlemen moving in and out of the blockchain industrial revolution,” Hayes explained.

Binance objected to the situation

The former CEO of BitMEX, who himself fell foul of the US Bank Secrecy Act when the exchange failed to adequately identify its customers, highlighted Binance's role in enabling everyday people to own cryptocurrency assets without the need for middlemen and traditional players.

“Before, people couldn't own a certain industry revolution in less than 10 minutes with desktop and mobile trading apps.”

From a fundamental perspective, Hayes added, centralized exchanges use government instruments such as corporations and legal structures to “undermine the institutions that are supposed to govern the global financial and political system.”

“How much did CZ pay? CZ – and by extension Binance – paid the largest corporate fine in Pax Americana history.

Hayes then points to several major banking scandals and the 2008 global financial crisis and economic collapse, which were directly caused by the collapse of the US housing market.

America and China are friends again. How will this new found love translate into a relationship? Read “Panda Power” for my take. Bonus feature: a little riff on the #BENANCE situation. pic.twitter.com/vKBPjMZ0Ce

— Arthur Hayes (@CryptoHayes) November 28, 2023

In most of these cases, major banking and financial institutions were largely discharged or held for limited liability. On the flip side, CZ and Binance have been hit hard by the US Department of Justice:

“Of course, the treatment of CZ and Binance is stupid and only highlights the arbitrary nature of punishment at the hands of the government.”

Next, Hayes delves into the complexities of the current US and Chinese economies, and how the latter will bring massive capital inflows into Bitcoin (BTC) over the next few years.

Capital is moving from China to Bitcoin.

The former CEO of BitMEX suggests that Chinese state-owned enterprises, manufacturers and investors are ready to invest capital offshore due to the lack of attractive returns domestically.

Peking University professor and former Bear Stearns trader Michael Pettis noted that China cannot take on profitable debt because investments do not generate returns greater than the interest rate on the debt.

“Instead, it's expressed in financial markets. I mean digital fiat credit money is a global funnel of capital. If China were to print yuan, it would enter the global market and support all kinds of risk asset prices,” Hayes explains.

Hong Kong's recent approval of a handful of licensed cryptocurrency exchanges and brokers means Chinese companies and individual investors have a way to buy bitcoin.

Given that China was once a bitcoin mining nation, Hayes suggests that many Chinese investors are familiar with the asset and its promise of a “store of value.”

“If there is a way to legally transfer cash from the mainland to Hong Kong, bitcoin will be one of the many risk assets to buy.”

From a macro perspective, Hayes outlines an argument for China to increase the domestic supply and accessibility of Chinese yuan-based credit. This could also lead to lower US dollar-denominated borrowing costs as Chinese companies have comparable domestic alternatives.

“As the dollar is the world's largest fund currency, if bond prices fall, all fixed supply assets such as bitcoin and gold will increase in dollar fiat value.”

Hayes added that the “absurd nature of global fiat credit” drives dollars into hard currency assets like bitcoin.

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