Market analysis

Is Binance’s $4.3bn settlement a blessing in disguise for BNB?

6 min read

The world’s largest crypto exchange Binance has been in the news a great deal lately. After more than a year of uncertainty around the classification of its BNB token, the exchange’s $4.3 billion settlement with the Securities and Exchange Commission (SEC) shocked markets last month. However, though the news initially hit the value of BNB, the decline was subdued and the token has since recovered some of these losses.

Indeed, many market commentators pointed out the positives in Binance’s decision to turn a new, compliant chapter in its history. Could the settlement and the resignation of its CEO, Changpeng “CZ” Zhao, be a blessing in disguise that will cement Binance’s position as the leading crypto exchange and propel its BNB token to new highs? We consider the outlook for BNB as the crypto bull market gathers pace.

Back to basics: The origins of BNB

BNB’s use cases have expanded significantly over time. First launched via an Initial Coin Offering (ICO) in July 2017, Binance Coin (BNB) was initially built on the Ethereum blockchain as an ERC-20 token and served primarily as a utility token within the Binance ecosystem. Its primary function was to facilitate discounted trading fees on the Binance exchange, as well as payment for various platform-related fees and services.

This remained the state of affairs until 2019 when Binance launched its native Binance Chain and transitioned BNB from the Ethereum network onto this proprietary blockchain. Binance Chain’s primary focus was to facilitate fast, decentralized trading. 

READ: How well do you really know BNB, Yield App’s latest listing?

However, it faced scalability issues, which eventually led to the creation of a second blockchain – Binance Smart Chain (BSC) – in September 2020. Through the use of smart contracts, BSC enabled users to participate in decentralized finance (DeFi) applications, yield farming, liquidity provision, and other blockchain-based services. At this point, BNB's utility expanded to include governance rights within the Binance ecosystem and participation in on-chain voting.

Today, BNB has a wide and growing variety of use cases, including being accepted as a payment method by some merchants and booking travel arrangements with a select group of travel companies. This real-world utility propelled the token’s price, making it the fourth-largest cryptocurrency by market capitalization.

BNB’s performance over time

Initially valued at a fraction of a dollar during its ICO, the token has experienced significant growth over the years. Most notably, BNB's price surged from around $40 in January 2021 to an all-time high of $686.31 by May of the same year.

2023_BNB Outlook blog-05.pngSource: 

Since then, the token is down some 65%, trading around the $238 mark at the time of writing (11 December 2023). One of the drivers for this was undoubtedly the crypto downturn of 2022 which brought down the value of the entire cryptocurrency market – including bitcoin and ether. 

However, BNB has faced headwinds of its own which have prevented the token from rallying in line with the rest of the digital asset market over recent months. Regulatory uncertainty around the status of BNB has been a major concern since July 2022, when the SEC announced an investigation into BNB’s potential status as an unregistered security. A year later, the watchdog decided BNB does, indeed, constitute an unregistered security, along with a raft of other altcoins.

Binance’s $4.3bn SEC settlement

In November 2023, the token was further hit by Binance’s admission of guilt on criminal charges of breaking sanctions and money-transmitting laws, which resulted in a $4.3 billion settlement with the SEC. Most notably, it also led to the resignation of its CEO CZ, to be replaced by Richard Teng, Binance’s former Global Head of Regional Markets. 

This led to a 10% drop in BNB, which had reached around $266 on 21 November 2023. Since then, the token has recovered some of its losses, but remains 17% lower year-on-year and has missed out on the rally many other altcoins have enjoyed over recent weeks. In fact, XRP is now getting dangerously close to overtaking BNB as the fourth biggest crypto asset by market cap.

2023_BNB Outlook blog-06.png

Source: CoinGecko

However, since its low of $204 in August 2023, BNB has seen a 16% recovery. In addition, its new CEO has firmly set his sights on regulatory compliance. In his first blog in the role, Teng wrote that “as an industry, we require more focus than ever on collaborating with policymakers”. 

This commitment to building a reputable, compliant business could benefit the crypto industry as a whole, driving its evolution toward a legitimate part of the wider financial ecosystem. It will also likely cement Binance’s role as a key institutional player in this ecosystem, which would support its token in the long run. 

However, it may also lead to less volatility in the value of BNB over time, which means the token may naturally lag behind many of its smaller peers on a percentage return basis. Its future returns will depend on many factors, including regulation, macroeconomics, and competition.

Key takeaway

Due to market conditions and regulatory pressures, BNB – the token powering the Binance crypto exchange – has faced a great deal of uncertainty over the past 18 months. Most recently, Binance’s huge settlement with the SEC and the resulting resignation of its CEO added fuel to the fire, keeping the price of BNB subdued compared to many other altcoins.

However, with the settlement behind it, the world’s biggest crypto exchange now appears committed to toeing the regulatory line. Over time, this is likely to benefit Binance, its users, and the industry at large, as crypto is slowly accepted as a legitimate part of the global financial industry. As the saying goes, a rising tide lifts all boats, so BNB’s long-term future may well be a bright one. As always, though, diversification and a proper assessment of risks should be a key pillar of any investment strategy – especially for those investing in digital assets. 

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