Binance transferred $3.9B in USDT ahead of a $4.3B DOJ settlement, raising questions about its financial strategies.
The recent actions of Binance, a leading crypto exchange, have garnered significant attention. Days before finalizing a settlement with the Department of Justice (DOJ), Binance initiated a large-scale transfer of Tether (USDT), moving $3.9 billion from its cold wallet. This move, though not directly linked, coincides intriguingly with the company’s settlement agreement involving a substantial penalty.
The Tether Transfer
Binance executed this major transaction on November 9, transferring USDT from one of its cold wallets, Binance-Cold 2, to another internal wallet, Binance 3. Notably, the transferred amount nearly matches the $4.3 billion fine included in Binance’s settlement. Post-transfer, Binance-Cold 2 holds assets totaling $6.6 billion, with a significant portion in USDT and the remainder in various other stablecoins like USDD, USDC, and TUSD. Meanwhile, the recipient wallet, Binance 3, now contains assets worth $3.2 billion, predominantly in USDT.
Binance has a history of utilizing cold wallets for safeguarding the majority of its funds. These wallets are crucial for maintaining the security and integrity of the company’s vast cryptocurrency holdings. The recent transaction, shifting billions in stablecoins, raises questions about Binance’s intentions. Whether these funds will address the U.S. government’s fine or be converted into U.S. dollars or other fiat currencies remains unclear. Binance’s response to these speculations is still awaited.
Tether’s Role in the Crypto Market
In the cryptocurrency market, stablecoins play a vital role, often making up the bulk of trading volume. They provide traders a means to enter and exit trades without directly dealing with fiat currencies like the U.S. dollar. Tether, the most prominent stablecoin, holds a significant position in the industry. With $88 billion in circulation, it represents 6% of the global crypto market cap, far surpassing its closest competitor, USDC, with a $24 billion market cap.
Tether has faced scrutiny from U.S. regulators over its claims of backing each token with an equivalent amount in fiat currency. In 2021, Tether settled an investigation for $18 million, addressing doubts about its fiat reserves. Despite consistent denials of any wrongdoing and claims of fear-mongering by detractors, Tether has not yet produced a comprehensive, independent audit of its reserves. Moreover, the company’s recent cooperation with authorities to freeze $225 million linked to human trafficking adds another layer to its complex history.
Binance, along with its CEO Changpeng Zhao, agreed to a hefty settlement with U.S. authorities, totaling $1.8 billion in criminal fines and an additional $2.5 billion in forfeitures. This agreement resolves long-standing investigations into Binance’s compliance with regulatory and anti-money laundering standards. As a result of the settlement, Zhao has stepped down from his CEO role, marking a significant shift in the company’s leadership.