In this issue

  1. Binance: Money-laundering mudfest
  2. STEPN: Sole survivor
  3. Crypto markets: China crisis

From the Editor’s Desk

Dear Reader,

It’s said that sharks can smell blood from a quarter of a mile away. So too can some journalists — of particular note this week, those at Reuters, which on Monday published an investigative report alleging that Binance, the world’s biggest crypto exchange, had functioned as a conduit for money laundering for five years.

To be fair, regulators around the world have been chumming the waters for a while, and Binance has swum into the sort of regulatory slick that no one looking to avoid the company of sharks would welcome — hence, presumably, its push since last year to improve compliance and buddy up with those same authorities.

The Reuters report makes for quite startling reading, and its allegations have been dismissed by the exchange. Still, crypto has historically attracted some dubious characters and enterprises — a whiff that, once acquired, as Binance is set to find out, may be hard to get rid of.

Binance’s efforts to boost its credentials as a responsible industry player that takes its regulatory and other obligations seriously strongly suggest that it has learned lessons, perhaps best demonstrated by its recent welcome by authorities in Europe.

However, the allegations of its use for ill intent are another reminder of the industry’s vulnerability — a point of exposure that participants are well aware of, and which they should be seeking internally to address if they are to gain the trust of regulators and, alongside them, investors. 

It’s not without a degree of irony that they may be advised to learn a lesson from the traditional finance sector and make sure their affairs are in order. After all, money laundering is a problem confronting the whole of the finance sector, not just its crypto component. And if crypto companies are swimming in the same waters as their TradFi counterparts, they’ll have to navigate the same kinds of risks.

Until the next time,

Angie Lau,
Founder and Editor-in-Chief

1. Borderline billions?

Binance Money-laundering mudfest
A Reuters report alleges that Binance has been a conduit for billions of illicit funds.
Image: Getty Images/Forkast

By the numbers: BNB — over 5,000% increase in Google search volume.

Binance, the world’s biggest cryptocurrency exchange, is hitting back at news agency Reuters over a report alleging that it was used as a means of laundering almost US$2.4 billion of illicit funds between 2017 and 2021. The exchange accused one of the authors of the report of having published a series of “breathless pearl clutching [sic]” articles relating to its affairs.

  • Binance, which processed more than US$9.5 trillion of transactions in 2021, was described by the Reuters report as a “conduit for the laundering of at least [US]$2.35 billion in illicit funds” originating from on-chain hacks, investment fraud and sales of illegal drugs, including theft by the North Korean, allegedly state-linked Lazarus Group that was behind the US$600 million attack on Axie Infinity’s Ronin chain last year.
  • Binance said in a blog post that the Reuters report was “rife with falsehoods, massive leaps to conclusions, and relies on poor data.” It published an email exchange with Reuters journalists in which Binance’s chief communications officer, Patrick Hillmann, said Binance did not consider the calculations in the report to be accurate.
  • A Reuters investigation published in January said the exchange was withholding information from regulators and conducting only weak anti-money laundering checks. In April, Reuters reported that Binance’s head of Eastern Europe and Russia had agreed to share client data with Russian authorities, an allegation that Binance immediately denied.
  • The price of Binance’s BNB token has dropped by nearly 10% in the past week to trade at US$290.38 at press time, according to CoinGecko

Forkast.Insights | What does it mean?

Binance has a “Facebook problem.” When the social network rose to prominence, overtaking all others, it became a hotbed for extremists, fake news, sexual predators and criminality.

Even though Facebook was not the instigator of illicit behavior, its platform was used to facilitate it. Binance is facing similar issues. Although money laundering and hacking are depressingly commonplace in the crypto space, it stands accused of unwittingly becoming a means by which criminals can cash out their ill-gotten gains. 

The problem isn’t confined to Binance. Centralized and decentralized exchanges alike can be channels for movements of criminal money. The problem facing Binance is what to do about it. 

Like Facebook before it, Binance has tried to discredit journalists and media outlets for investigating and reporting accusations made against it. That might jive with a few of its most devout followers, but such a hostile response is easily interpreted as — to borrow a phrase from Shakespeare — a tendency to “protest too much” and thus an encouragement to subject Binance’s conduct to even closer scrutiny. 

A better response on the exchange’s part would have been to appoint a genuinely independent third-party auditor to investigate the findings, make them public, warts and all, and — whether any wrongdoing is found or not — put in place improved security to make it more difficult for it to be used as a means of laundering dirty money. 

2. False steps

STEPN Sole survivor
Is move-to-earn star STEPN moving in the wrong direction? Image: STEPN

By the numbers: STEPN — 3,600% increase in Google search volume.

Move-to-earn blockchain app STEPN suffered multiple distributed denial-of-service (DDOS) attacks after an anti-cheating upgrade over the weekend, leading to network issues and frustration among its users. STEPN, launched in March, is a Solana-based blockchain app that allows users to purchase non-fungible token sneakers, “wear” them, and engage in exercise to earn crypto rewards. The app follows a dual-token model, with a utility token named Green Satoshi Token (GST) and a governance token called Green Metaverse Token (GMT).

  • On Sunday, STEPN said it had suffered a 25 million-hit DDOS attack during the update, during which its artificial intelligence algorithms misidentified some users as bots and blocked them from the network.
  • STEPN had announced the upgrade last Friday, a modification to use AI and machine learning to identify cheats and bots faking movements in the game and disconnect them from the network.
  • STEPN has now suffered three DDOS attacks since its launch, the first in April and the second last month.

Forkast.Insights | What does it mean?

STEPN may be dealing with a stampede of users unhappy that they are no longer allowed to cheat, but the bigger story is that STEPN has neither been hacked nor has it collapsed under the strain. This should be seen as a victory for the project. 

Move-to-earn apps are becoming increasingly popular. Sweatcoin, arguably the world’s largest community of steppers, recently announced it was moving into crypto, joining STEPN, Tracer and a host of others. 

Crypto users are surprisingly quick at learning how to game and cheat systems that pay out for performing certain tasks, and developers of decentralized apps are right to stay one step ahead. The challenge such projects face is whether they can keep users engaged as the incentives to do so begin to decline. 

Early adopters of play-to-earn, popularized by games like Axie Infinity, were rewarded with higher earning potential. But over time, those earnings declined, leaving many to seek better opportunities elsewhere. Move-to-earn apps are based on a similar business model. Although STEPN lives to stride another day, it needs to prepare for its next uphill battle: how to grow in a decidedly difficult crypto landscape.  

3. When China catches a cold

Crypto markets China crisis
China’s economic crunch, worsened by its hardline anti-Covid stance, is spilling over to the crypto market. Image: Canva

Economic woes caused by a slowdown in China are affecting cryptocurrency investors outside the country alongside those inside it who have evaded official attempts to crush the industry. Shanghai lifted its Covid lockdown at the beginning of the month, but China’s dogged determination to adhere to a “zero-Covid” policy is unlikely to brighten its economic outlook.

  • “The fact that they’re still going to maintain this zero-Covid policy is a big overhang still on the markets,” Andrew Sullivan, founder of, told Forkast.
  • Shanghai’s two-month lockdown led to factory closures by multinational companies such as Apple and Tesla and placed additional pressures on already stressed global supply chains.
  • “Financial markets have reacted accordingly, selling Chinese assets in large volumes, while corporates reassess the importance of China within their global strategies,” U.S.-based think tank Rhodium Group said in a May 31 report.
  • China’s troubles have helped to fuel inflation around the world, including in the U.S., where the Consumer Price Index registered a year-on-year increase of 8.3% in April, and consumer prices are expected to continue rising in the near to medium term.
  • Bitcoin was once credited with being a hedge against inflation, but the value of the world’s oldest cryptocurrency has fallen more than 50% from its all-time high last November. Meanwhile, as institutional adoption has pushed Bitcoin and other cryptos into the mainstream, their price correlation with traditional markets has increased. 

Forkast.Insights | What does it mean?

As increasing numbers of traditional investors around the world diversify their portfolios into cryptocurrency, they are also contributing to Bitcoin’s increasing correlation with the fortunes of traditional financial markets. Spooking investors in particular has been inflation, which likely has been made worse by China’s zero-Covid policy and its disruption of global supply chains. 

As we enter summer, a crypto winter has indisputably descended across the industry, with digital asset funding inflows not what they used to be and the value of most coins a long way from the dizzy heights of last year. But some argue that this current difficult moment also presents business opportunities to enter this space and may be a great time for investors and entrepreneurs to build. 

As economies everywhere sputter, developer talent from the likes of Chinese tech giant Tencent, Q&A platform Zhihu and video streaming service Bilibili — which are continuing to cut jobs — may find themselves with new prospects in the Web 3.0 world.

But with the crypto winter bringing chills to the market, it remains to be seen how Web3 investments in China pan out. The specter of future lockdowns and more supply-chain problems loom large if new variants emerge and China persists in pursuing its zero-Covid policies.