JPMorgan says Binance settlement 'positive' as it eliminates potential systemic risk from hypothetical collapse

Crypto exchange Binance reaching a settlement with U.S. prosecutors on Tuesday is a good thing for its business and the crypto sector, according to JPMorgan.

"We see the prospect of settlement as positive as uncertainty around Binance itself would subside and its trading and BNB -1.40% Smart Chain business would benefit," JPMorgan's analysts led by Nikolaos Panigirtzoglou told The Block. "For crypto investors the prospect of settlement would see the elimination of a potential systemic risk emanating from a hypothetical Binance collapse."

Under a comprehensive settlement with U.S. agencies on Tuesday, Binance and its co-founder Changpeng "CZ" Zhao pleaded guilty to anti-money laundering and U.S. sanctions violations. Binance agreed to pay $4.3 billion in one of the largest corporate settlements in U.S. history. Zhao will pay a $50 million fine under a deal that required him to step down as CEO. The settlement, which includes the Justice Department, Treasury Department and the Commodity Futures Trading Commission, ended a years-long investigation into the exchange.

After pleading guilty, Zhao was released from custody on a $175 million personal recognizance bond. He faces a maximum prison sentence of 18 months, and his sentencing hearing has been scheduled for Feb. 23, 2024.

CZ: Binance 'will be fine'

"Binance will be fine," Zhao wrote in an internal memo to staff as he resigned from the CEO role. "I will have to deal with some pain, but will survive. We will get through, although with some changes in structure. It might not be a bad thing when we look back in a few years time."

Binance's Richard Teng succeeded Zhao as CEO. Teng, a former regulatory official, said his priorities include reassuring Binance users that "they can remain confident in the financial strength, security and safety of the company." Binance said it is "confident" that it will emerge as a stronger company as it lays the foundation "for the next 50 years."

Amid the settlement news, Binance has witnessed outflows worth over $1 billion in the last 24 hours, while some rival exchanges are seeing inflows, according to DefiLlama data. Binance's native token, BNB, has also fallen nearly 10% in the past 24 hours and is currently trading at around $234, according to The Block's Price page.