In a bold exploration of Binance’s recent $4.3 billion settlement, former BitMEX CEO Arthur Hayes contends that the cryptocurrency exchange paid a hefty price for daring to defy the financial and political status quo in the United States.
Hayes, in a comprehensive Substack post, delves into the enforcement actions against Binance, a consequence of the exchange and its founder, Changpeng “CZ” Zhao, admitting to violating U.S. laws related to money laundering and terror financing.
Highlighting Binance’s explosive growth and its ascent to the largest global exchange by trading volume since its inception in 2017, Hayes emphasizes the exchange’s significant influence, ranking in the top 10 among traditional exchanges by average daily volume.
According to Hayes, the financial and political establishment faced a challenge from Binance as it facilitated the entry of everyday people into the blockchain industrial revolution without the involvement of traditional intermediaries.
“Never before had people been able to own a piece of an industrial revolution in under 10 minutes via desktop and mobile trading apps,” remarks Hayes.
He underscores that centralized exchanges, including Binance, fundamentally use state tools to disintermediate institutions that were traditionally meant to govern the global financial and political system. The consequences for Binance and CZ were severe, as they paid the largest corporate fine in Pax Americana history.
Hayes compares this treatment to the leniency shown to mainstream banking institutions during high-profile scandals and the 2008 global financial crisis, emphasizing the arbitrary nature of punishment by the state.
Moving beyond the fine, Hayes explores the current states of the U.S. and Chinese economies, suggesting that Chinese capital may flow into Bitcoin in the coming years. He cites the lack of attractive local returns as a motivator for Chinese state-owned enterprises and investors to seek offshore investments, potentially driving capital into Bitcoin.
Quoting Peking University professor Michael Pettis, Hayes explains the dynamics of China’s debt and its impact on global markets. He predicts that if there is a legal means for Chinese investors to move cash from the mainland to Hong Kong, Bitcoin will be among the risk assets purchased.
From a macro perspective, Hayes argues for an increase in the availability and affordability of Chinese yuan-based credit, potentially leading to a fall in the price of U.S. dollar-based credit. In this scenario, he anticipates a rise in the prices of fixed-supply assets like Bitcoin and gold in dollar terms, driven by the global flow of fiat credit.