US DOJ deliberates fraud charges against Binance, but concerns of implications to customers weigh over

  • The US Department of Justice is planning to launch fraud charges against Binance exchange.
  • The prosecutors are concerned, however, about possible blowback to customers akin to what happened with the FTX exchange.
  • Alternative options to punish the alleged crime would be a compromise, with the DOJ deliberating between fines and deferment.

The US Department of Justice (DOJ) is deliberating ways to hold Binance Exchange accountable for alleged fraud charges. However, the authority is at a crossroads as advancement could harm innocent customers. Notably, the dilemma comes as memories of the FTX exchange bank run remain fresh.

Also Read: Breaking: Litecoin completes third halving event, block rewards slashed to 6.25 LTC

US DOJ to prosecute Binance, but a lot is at stake

US DOJ is planning to levy charges against the largest cryptocurrency exchange by trading volume, Binance, citing fraud, adding to the stockpile of charges against the giant exchange and its CEO Changpeng Zhao pushed by the US Securities and Exchange Commission (SEC).

While the federal prosecutors believe in the solidity of their case, they are hesitant as concerns of a run-on lingering. For the layperson, a run-on is a situation where investors withdraw their money from the platform out of fear, leaving the exchange without liquidity. The same was observed when crypto exchange FTX collapsed after Sam Bankman-Fried was called out for commingling customer assets with sister firm Alameda Research.

In the FTX case, customers suffered the brunt of a collapsed exchange, with volumes of money stuck as individual investors and institutions both cited exposure. Similarly, the federal prosecutors fear that by prosecuting Binance they could provoke a run-on against the platform, with many customers likely to suffer financial losses.

Faced with these concerns, the prosecutors are considering alternative options. Sources close to the matter have indicated that Binance could face a “deferred or non-prosecution agreement,” pay a fine, or in the dire case, both, as the DOJ looks to protect customers.

With the prosecution now finding itself at a standstill, the news indicates how exposed customers are, unlike in the traditional banking system, constantly facing the risk of financial losses as exchanges and the authorities tip-toe around each other.

Binance stockpile of charges grows

Meanwhile, Binance exchange and its CEO CZ are also facing the US SEC and the Commodity Futures Trading Commission (CFTC) after the financial regulators charged them for “operating an unregistered exchange in the US and knowingly allowing its citizens to participate in Binance’s offshore exchange.” Other charges include misleading customers and investors through Sigma Chain, a CZ-associated secret market-making firm used to manipulate trades on the exchange’s subsidiary in the US, BinanceUS.

US Senator Elizabeth Warren is also on record criticizing Binance for lying to Congress and calling for the authorities to pursue criminal investigations. An excerpt from her letter to the DOJ reads:

These actions by Binance and Binance.US represent a potential violation of federal law that may subject company officials to fines and imprisonment.

Despite the stretch of these allegations, and cognizant of the potential implication to themselves, the community has somewhat defended Binance while bashing Western media. 

Neither Binance nor the DOJ has given an official statement on the same, but FXStreet will bring updates as they unfold. 

Also Read: Why Litecoin price could crash nearly 50% ahead of third LTC halving event

Litecoin halving FAQs

When is the next Litecoin halving?

Litecoin’s third block halving event is scheduled to take place at a block height of 2,520,000, which is estimated to happen around August 3. The current block height is 2,511,587. The first halving took place in 2015 after the block height was 840,000. The second Litecoin halving event occurred in 2019 when the total block height hit 1,680,000. This event takes place roughly once every four years.

What will be the new block reward after the third Litecoin halving?

Halving is an important event for both miners and investors. After halving, the block rewards are slashed in half, as the name suggests. The first halving event in 2015 reduced the block reward from 50 to 25 and the second one in 2019 halved it to 12.5. The third halving, which is scheduled on August 3, will further reduce it to 6.25. This means that miners will go from receiving 12.5 LTC for mining a block to 6.25 LTC after the third halving.

How will halving affect Litecoin price?

After a halving event, the emission of LTCs is cut in half, which effectively triggers a reduction in the Litecoin supply. If the demand remains more or less the same, it creates a negative supply shock. The same dynamics are seen if the demand for LTC increases. Due to the reduced supply and high demand, it would trigger a rally in Litecoin price. But traders often anticipate this trend and try to get an exposure to LTC before the halving, causing a premature rally and a sell-the-news drop on the day of the event.

Why is Litecoin halving important to LTC holders?

Following a halving event, miners receive 50% fewer rewards for every block they mine and this creates scarcity in the altcoin, reducing the circulating supply of the asset. The event’s purpose is to control the inflation rate of Litecoin. Halving is therefore a key event that influences the asset’s price and market capitalization over time.

How different is Litecoin halving from Bitcoin halving?

From a technical perspective, it is not any different. But from an investor and miner perspective, there are lot of differences. For example, the concept of halving remains the same for both assets, but due to relatively lower total supply of 21 million and first-mover advantage, Bitcoin’s network effect and large market capitalization as a result has a significant impact on the crypto ecosystem as compared to Litecoin. Additionally, the effect of halving events is more pronounced for Bitcoin, because of the asset’s dominance, hence BTC halving receives more attention.

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