Examining the CZ pardon case: How does the U.S. pardon system affect the cryptocurrency sector?

I. Presidential Pardon: Broad Executive Authority

The federal system divides pardon authority: both the President and state-designated agencies wield independent powers to grant pardons.

At the federal level, Article II, Section 2, Clause 1 of the U.S. Constitution clearly states: "Except in cases of impeachment, the President... shall have Power to grant Reprieves and Pardons for Offenses against the United States." In practice, this means the President can pardon any federal crime except impeachment cases.

State constitutions define pardon powers, which generally fall into four categories: exclusive power held by the governor; exclusive power held by a committee or advisory group; shared authority where the governor is a committee member; or cases where a committee’s recommendations constrain the governor’s power.

This section from the Xiao Sa Legal Team spotlights the presidential pardon—arguably the most prominent and classic component of the U.S. pardon system—to demonstrate how this authority operates and takes effect.

Under the U.S. Code, individuals seeking a presidential pardon must apply themselves, typically citing acceptance of criminal responsibility, genuine remorse, attempts at restitution, and readiness to lead a law-abiding life. Applications must include at least three written statements from character witnesses.

The Office of the Pardon Attorney, under the Department of Justice, reviews pardon applications and may enlist agencies like the FBI to investigate. Before recommending a pardon, officials must consider feedback from relevant agencies and victims. They then issue a recommendation report. The Deputy Attorney General reviews and signs the report, forwarding it to the White House Counsel, who presents it to the President for a final decision.

While these procedures appear robust, they actually constrain only those seeking pardons—not the President’s own initiative.

If the President chooses to grant a pardon independently, almost no limitations apply, except those stated in the Constitution: limited to federal crimes and excluding impeachment. In Ex parte Garland (1866), the U.S. Supreme Court affirmed that the President’s pardon power is "broad and unlimited."

This sweeping authority has roots in colonial history, influenced by the British monarchy—English kings held pardon rights as early as the seventh century—and also serves as a counterbalance in America’s separation-of-powers framework. The pardon is a discretionary executive power, designed to check the legislative and judicial branches and ensure mercy for victims of unfair trials when necessary.

After a pardon is granted, two primary legal effects follow: first, complete or partial relief from the imposed sentence; second, restoration of all rights lost due to conviction, including voting, holding public office, and pursuing certain professions. In Ex parte Garland (1866), the Supreme Court ruled that a pardon "removes the offense and its legal consequences," rendering the recipient "as if they had never committed the offense" under the law.

However, while the sentence is wiped clean, the conviction remains; the facts of the crime are not erased, and any moral stigma may linger in the eyes of the public.

II. The Dynamics Behind CZ’s Presidential Pardon

Having explored the U.S. pardon system, the Xiao Sa Legal Team now explains how this framework was applied in the case of Changpeng Zhao (CZ) and his pardon by President Trump.

In 2023, amid a global tightening of cryptocurrency regulations, the U.S. Department of Justice brought criminal charges against CZ and Binance, citing violations of the Bank Secrecy Act—specifically, failing to establish effective anti-money laundering (AML) and know-your-customer (KYC) protocols.

CZ reached a plea deal with the DOJ, paying a $50 million personal fine, while Binance paid $4.3 billion to settle.

In April 2024, the U.S. District Court in Seattle sentenced CZ to four months in prison. After completing his sentence, CZ left the U.S. and did not resume his role as Binance CEO. On October 23, 2025, President Trump issued a pardon for CZ, reigniting public attention to a seemingly closed legal case.

Trump’s pardon exemplified direct presidential action, initiated independently and unconstrained by legal processes or institutions.

The implications of Trump’s pardon for CZ are as follows.

First, CZ had already served his jail time (four months), so the pardon didn’t reduce his imprisonment;

Second, the $50 million fine paid under the plea agreement will not be refunded due to the pardon;

Third, the real impact lies in restoring CZ’s eligibility to participate in the financial industry—the restoration of rights.

Under the Bank Secrecy Act, individuals with a criminal record are typically barred from managing regulated financial institutions or partnering with U.S. financial firms. With the pardon, those restrictions are lifted, allowing CZ to re-enter the cryptocurrency industry, hold executive roles in fintech, and reestablish business ties with American institutions.

III. The Aftermath of CZ’s Pardon for the Crypto Industry

CZ’s pardon is already shaping both short-term and long-term trends in the cryptocurrency sector.

In the short run, the news boosted Binance and the crypto market. Following the announcement of CZ’s pardon, Binance’s native cryptocurrency, BNB, surged 8%, and leading cryptocurrencies like Bitcoin also jumped—clear signs of investor optimism for Binance and the broader market.

Still, uncertainties remain. Binance faces ongoing regulatory scrutiny, with its $4.3 billion penalty and operational restrictions still in place, making it challenging for Binance to return to the U.S. market. If compliance falls short, the recent rally may not hold, and investors should be alert to possible market corrections as sentiment cools.

Long term, some view CZ’s pardon as a signal that the Trump administration aims to end Biden’s "war on crypto," suggesting the U.S. could shift from cautious oversight to proactive innovation—strengthening its leadership in the digital asset space.

However, the pardon also stirs controversy over "political favoritism," given Binance’s close ties to the Trump family’s stablecoin project, USD1. Whether this was an exchange of financial support for political influence is open to debate. As public concern about crypto regulation and independence grows, such moves intensify industry worries about regulatory fairness.

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