Michael Novogratz, CEO of crypto investment firm Galaxy, said in a YouTube video that in light of the hits the crypto industry has taken over the last several months, retail organizations getting involved in the crypto space is a critical step towards helping institutions become more involved in crypto.
He criticized those who were hoping that the Department of Justice's (DOJ) recent announcement of a major enforcement action would be aimed at Binance, saying Binance's liquidity is supporting the crypto sector at large, and the CEO and founder of Binance, Changpeng Zhao (CZ), has always prioritized the protection of Binance users.
"Crypto needs the retail participants to come back to these communities, to buy in, to believe, to drive price, because that's what's going to get institutions back engaged. Institutions intellectually understand this business - blockchain versus Bitcoin versus Ethereum - they've done all their homework. They're gun shy. It's going to take energy, price - energy is price," Novogratz said on the Real Vision Crypto podcast.
Strategic partnerships between crypto companies and retail organizations could help bring awareness of crypto to a broader audience, which in turn could accelerate mainstream blockchain adoption, according to a report from Converge. Increased blockchain adoption will encourage more innovation in the crypto space, enabling “developers to create powerful new services and apps,” which will lead to even more adoption, according to crypto writer Will Kendall of CoinMarketCap.
On Jan. 18, the U.S. Department of Justice announced charges against the founder of crypto exchange Bitzlato Ltd., according to a press release. Russian national Anatoly Legkodymov was arrested in Miami for allegedly processing hundreds of millions of dollars in illicit funds. Deputy Attorney General Lisa O. Monaco called Bitzlato a "money laundering engine that fueled a high-tech axis of cryptocrime." Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division said Bitzlato "failed to implement required anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking." The exchange transacted more than $700 million in cryptocurrency with Hydra, a darknet market that provided illicit narcotics, fraudulent identification documents, and money laundering services until it was shut down in April 2022. The release stated that Bitzlato, which is registered in Hong Kong and operates globally, touted the fact that it had weak know-your-customer (KYC) protocols, requiring minimal identification and accepting "straw man" registrants.
"You know, there was this announcement today that the DOJ (Department of Justice) was going to - and I was like, please don't let it be Binance. Listen, we need to cheer for Binance...They are some giant percentage of the liquidity. CZ has been always very focused on customer service, and so he's got a very loyal, giant retail following that believes in our ecosystem," Novogratz said. "Like, we need those guys! It drives me crazy how many people on Twitter and other media just want to smash people down or would be nothing happier than if CZ stepped on a banana peel and slipped...It's the wrong thinking. We need CZ to succeed."
Binance, the world's largest crypto exchange, complies with the strict KYC protocols that are required of all financial institutions by the 2001 USA Patriot Act to prevent money laundering and fraud, according to its website. In order to become a Binance customer, individuals must submit a driver's license or other government-issued photo ID, a passport, a social security number, and address verification, among other documentation. The Binance website states, "Compliance is time-consuming but should always be encouraged."
Galaxy Digital Founder and CEO Michael Novogratz previously worked as a partner and president of Fortress Investment Group and as a partner of Goldman Sachs, according to the Galaxy website. He also previously served on the New York Federal Reserve’s Investment Advisory Committee on Financial Markets.
In the wake of crypto exchange FTX's bankruptcy filing in November, Blockworks published a report titled "Thanks, Binance: Crypto Liquidity Shows Signs of Recovery," which cited a recent study by Kaiko which found that out of the 5 largest crypto exchanges, Binance's market depth, a measure of liquidity, was performing the best by a significant margin. Binance maintained a weekly trading volume of more than $80 billion, which analysts attributed to its drastic fee reductions.
More than 50 retail participants around the world have partnered with Binance Pay to enable users to purchase goods from merchants with cryptocurrency, according to Binance's website.
A pinned post on the Binance blog outlines the "Principles" of CZ, the Canadian founder and CEO of Binance. CZ's principles include being fair and ethical, avoiding relationships with unethical people, taking responsibility for both successes and failures, learning constantly, and prioritizing user experience. CZ wrote, "Never cross ethical boundaries. It always comes back and bites you. In dealing with users, always do the right thing, not the easiest thing."