The explosive growth and success of Binance outside of the control of the traditional financial and political establishment led to heavy-handed enforcement actions against the exchange, according to former BitMEX CEO Arthur Hayes.
Hayes delved into the recent $4.3 billion settlement paid out by Binance in a lengthy Substack post. This comes after the exchange and its founder, Changpeng “CZ” Zhao, admitted violating United States laws around money laundering and terror financing.
As Hayes highlights, CZ’s global exchange became the largest by trading volume in the six years since its inception in 2017. The former BitMEX CEO points out that Binance would also be rated in the top 10 traditional exchanges by average daily volume, which is indicative of its growing influence on a global scale.
“The problem for the financial and political establishment was that the intermediaries facilitating flows into and out of the industrial revolution named blockchain were not run by members of their class,” Hayes opined.
Binance challenged the status quo
The former BitMEX CEO, who himself fell foul of violating U.S. Bank Secrecy Act regulations after the exchange failed to implement adequate Know Your Customer procedures, highlighted Binance’s role in allowing everyday people to own intermediaries and cryptocurrency assets without needing traditional players.
“Never before had people been able to own a piece of an industrial revolution in under 10 minutes via desktop and mobile trading apps.”
Hayes added that from a fundamental standpoint, centralized exchanges use tools of the state, such as the company and legal structures to “disintermediate the very institutions that were supposed to run the global financial and political system.”
“How dearly did CZ pay? CZ — and by extension, Binance — paid the largest corporate fine in Pax Americana history.”
Hayes then refers to several high-profile mainstream banking scandals, as well as the 2008 global financial crisis and subsequent recession, which was directly attributed to the collapse of the U.S. housing market.
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In most of these instances, mainstream banking and financial institutions were largely absolved or held to limited accountability. On the flip side, CZ and Binance were hammered hard by the U.S. Department of Justice:
“Obviously, the treatment of CZ and Binance is absurd and only highlights the arbitrary nature of punishment at the hands of the state.”
Hayes then delves deeply into the intricacies of the current state of the U.S. and Chinese economies and how the latter could drive massive capital inflows to Bitcoin (BTC) in the next few years.
Capital making its way from China to Bitcoin
The former BitMEX CEO suggests that Chinese state-owned enterprises, manufacturers and investors are set to begin investing capital offshore due to a lack of attractive returns locally.
Quoting Peking University professor and former Bear Stearns trader Michael Pettis, Hayes writes that China cannot profitably absorb more debt because investments do not yield returns that exceed the debt’s interest rate.
“It gets punted in the financial markets instead. Capital, by which I mean digital fiat credit money, is globally fungible. If China is printing yuan, it will make its way into the global markets and support the prices of all types of risk assets,” Hayes explains.
Hong Kong’s recent approval of a handful of licensed cryptocurrency exchanges and brokers means that Chinese companies and individual investors have the means to purchase Bitcoin.
Given that China was once a powerhouse Bitcoin mining nation, Hayes suggests that many Chinese investors are well acquainted with the asset and its “promise as a store of value,” stating:
“If there is a way to legally move cash from the Mainland to Hong Kong, Bitcoin will be one of many risk assets that will be purchased.”
From a macro perspective, Hayes outlines an argument for China to increase the availability and affordability of Chinese yuan-based credit locally. This, in effect, may lead to the price of U.S. dollar-based credit falling, given that Chinese companies have an affordable domestic option.
“Given that the dollar is the world’s largest funding currency, if the price of credit falls, all fixed supply assets like Bitcoin and gold will rise in dollar fiat price terms.”
Hayes adds that the “fungible nature of global fiat credit” will lead to dollars flowing into hard monetary assets like Bitcoin.
Bridget Phillipson has emerged as the early frontrunner in the Labour deputy leadership race as other candidates scramble to catch up ahead of a crunch deadline.
The education secretary had the backing of 44 colleagues as of 6pm on Tuesday, according to the first official tally released by the Parliamentary Labour Party (PLP) since nominations opened.
Former Commons leader Lucy Powell, who was sacked by Sir Keir Starmer in his reshuffle last week, is close behind with 35, followed by backbenchers Bell Ribeiro-Addy with eight, Dame Emily Thornberry with seven and Paula Barker with three.
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Housing minister Alison McGovern is currently coming last with two nominations, though sources on her campaign team suggested this did not reflect the true level of support behind her.
Candidates have until 5pm on Thursday to receive the backing of 80 colleagues, meaning there is still plenty left to play for as less than 100 MPs have made their official nominations so far, out of 398.
A fresh tally will be published by the PLP on Wednesday evening, though MPs may publicly reveal who they are backing before then.
Those not on the PLP’s current list include Southport MP Patrick Hurley, who has thrown his weight behind Ms McGovern in a post on X.
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Candidates will have the chance to woo undecided colleagues during a hustings event on Wednesday evening, but there are fears it could descend into chaos as the event will be held online only.
That means hundreds of MPs will have just one hour to quiz the six contenders virtually. It is not clear if or how the event will be moderated.
Image: Bridget Phillipson, Bell Ribeiro-Addy, Lucy Powell, Dame Emily Thornberry, and Paula Barker
Ms Barker, the MP for Liverpool Wavertree, expressed concern about the logistics of the contest.
Asked if she feels confident she can get the numbers, she told Sky News: “I think the very tight timeframe and the fact hustings for MPs are being held online 8pm – 9pm when the majority of colleagues are travelling home undoubtedly compounds the issue.
“Of course, that is an issue to be addressed by whoever wins the race and at this moment in time we are all in the same boat.”
However, a Labour source defended the decision, saying: “There’s frankly no convenient time to do it. Ministers will have busy diaries serving the public during the day… priority has to remain public service.”
Ms Ribeiro-Addy has also criticised the contest’s rules, telling Sky News’ Politics Hub with Sophy Ridge that having just a few days to get 80 nominations “doesn’t feel right”, especially given the winner is “ultimately decided by members”.
Candidates who make it through the first round must go on to win the support of either 5% of Constituency Labour Parties (CLPs) or three organisations affiliated to the party, two of which must be trade unions.
The successful candidates will then appear on the ballot for a vote of all party members and affiliated party supporters, with results declared on 25 October.
The six-week timeline was set by Labour’s ruling National Executive Committee but will be overseen by the party machinery who insist they will work with all candidates to give them a fair hearing.
There are many MPs and ministers who want to see the contest done quickly, to avoid it being a distraction from the government’s priorities.
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Length of race ‘doesn’t feel right’
Candidates make their pitch
The race was triggered by the resignation of former deputy prime minister and housing secretary Angela Rayner after she admitted underpaying stamp duty on a flat she bought in Hove.
Following calls for her replacement to be a Northern woman, all six candidates who entered are female, though Ms Ribeiro-Addy and Dame Emily represent seats in London.
Ms Phillipson and Ms McGovern are seen as candidates that would remain loyal to Number 10, which some MPs want to see to avoid the party becoming more divided. They both honed in on their Northern roots while pitching themselves as the candidate to take on Reform UK when announcing their deputy leadership bids on Tuesday.
Clapham and Brixton Hill MP Ms Ribeiro-Addy is seen as the left-wing candidate, and has the backing of many MPs in the Socialist Campaign Group (SCG) such as Corbynite Richard Burgon.
However, Ms Baker, a former trade union official and Ms Thornberry, chair of the foreign affairs committee, have also vowed to challenge the government on issues like welfare and Gaza.
Manchester Central MP Ms Powell was recently ousted from government and said she decided to stand “after much encouragement” from colleagues.
A Survation survey of 1,308 Labour members who read the LabourList website suggested Ms Phillipson was the most popular choice for the role.
The Protect Progress PAC spent more than $1 million to support James Walkinshaw in a primary for the congressional seat, in a race that could narrow Republicans’ House majority.
Kemi Badenoch has offered to help the government pass legislation to slash the welfare bill – but with conditions attached.
In a speech on Tuesday morning, the Conservative Party leader accused the government of having “totally lost control of spending” and “leading Britain into a deeper and deeper crisis”.
She argued that the only way to fix the issue was to dramatically reduce the welfare budget – and set out to Sky News political correspondent Tamara Cohen her conditions for supporting the government.
Speaking at the Institute of Chartered Accountants, Ms Badenoch said: “We are the only party arguing that government has to live within its means.
“Every single other political party in parliament today, every single other one, wants to increase welfare spending and they voted to do so.
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“They wanted to lift the so-called two child benefit cap. They don’t mind that our sickness benefits bill alone is on course to reach £100bn by 2030.”
The Tory leader said the chancellor will have no option but to raise taxes at the budget in the autumn to fund Labour’s spending plans, and also pay the interest on the vast government debt.
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Is Badenoch right to say UK might need a bailout?
But she claimed that “some in government must know that things need to change”, saying: “You can picture their grim faces, looking at the latest OBR [Office for Budget Responsibility forecast] figures.
“But the truth is they came into government with no real plans for how to save money – only how to spend it. That’s why they are in trouble.”
To that end, she said she is “making the prime minister a serious offer” because “the Conservative Party will always act in the national interest”.
She noted that Sir Keir Starmer had tried to cut welfare spending by targeting benefits paid to disabled people, but had to “gut” the legislation just before the vote and was “humiliated by his own backbenches”.
But she continued: “If he is serious about cutting spending, and really bringing down the welfare bill, we will help him.”
And pointing to Angela Rayner’s resignation, and the ensuing contest for a new deputy Labour leader, Ms Badneoch said: “Whether he wants to admit it or not, Keir Starmer needs our help.”
‘We need to find common ground’
Speaking to Sky News after her speech, the Tory leader said she will only support new government legislation on welfare as long as it brings the total spending down.
“Right now, what I’m offering is for us to sit down together and find common ground,” she told Cohen. “We know that this is difficult, but Conservatives have done this before. We had to find welfare savings and reform welfare in the coalition, [majority] government and after, and we can do it again.”
Image: Labour called the Tory leader ‘delusional’. Pic: PA/House of Commons
She insisted the Tories reduced the welfare bill before the pandemic, when it started going up again.
She said: “We fixed the previous problem. There is now a new problem and what we’re saying is let’s work together to fix it.”
“If we don’t live within our means, we will go bankrupt and our children will have to pay off the debt,” she added.
‘Stop all these distractions’
Ms Badenoch was also challenged on her claim that she was offered a scholarship place at the Stanford Medical School in California, which The Guardian reports has been denied by the admissions staff who were there at the time.
She told Cohen: “They’ve been told something that I didn’t say. I didn’t say I was offered a place – I said I was offered a scholarship, a part scholarship. I hadn’t applied for it.
“But I stand by every single thing that I said. It’s something American universities do. They send out speculative offers.”
Image: Kemi Badenoch was asked about scholarship offer claims. Pic: PA
She called on people to “stop all these distractions about who said what, and who’s up and who is down”, and focus on Angela Rayner’s property taxes, and the economy.
“I tell the truth. I stand by what I said. But right now, the truth is our economy is going in the wrong direction – it’s in free fall, and we have got to fix this.”
A Labour Party spokesperson rejected Ms Badenoch’s offer of help.
“It’s delusional of Kemi Badenoch to think anyone would want to take economic advice from her Conservative Party,” they said. “Their economy-crashing, growth-killing, irresponsible approach to governing left mortgages spiralling and working people worse off.
“The only thing in Britain that needs a bailout is the Conservative Party from its leadership. The Tories haven’t listened, they haven’t learned, and they can’t be trusted.
“Labour is clear that people who can work should work. This Labour government is getting people back into the workplace and out of the doom loop of joblessness that spiralled out of control under the Conservatives.”