Interpreting CZ's Pardon Case: What Impact Does the U.S. Pardon System Have on the Crypto Community?

By: Attorney Xiao Sa's Team

On October 23, the White House officially announced that Trump exercised presidential clemency to pardon Changpeng Zhao, former CEO of Binance. This event caused a major stir in the crypto community, sparking both confusion and surprise over the incident itself, as well as reflections on its potential impact on the future of the cryptocurrency industry.

Today, TechFlow will discuss the U.S. clemency system and explore how this system functioned in the case of Zhao’s pardon.

1. "Like a King"—Unrestricted Presidential Clemency Power

The United States has a federal system, so clemency powers follow a dual structure—both the federal president and state-level authorities exercise clemency within their respective jurisdictions.

At the federal level, Article 2, Section 2, Clause 1 of the U.S. Constitution explicitly states: "The President... shall have Power to grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment." This means the U.S. President may exercise clemency for any federal crime, with the sole exceptions of impeachment cases.

At the state level, clemency procedures are primarily defined by state constitutions, taking four main forms: exclusive authority held by the governor; exclusive authority held by a board or advisory committee; shared authority where the governor is part of a clemency board; or cases where recommendations from a board or advisory committee are binding on the governor’s clemency decisions.

In this section, TechFlow focuses on presidential clemency—the most well-known and representative aspect of the U.S. clemency system—to illustrate how the system operates and takes effect.

According to the procedures set forth in the U.S. Code, presidential pardons require self-application by the offender. The application must argue acceptance of criminal responsibility, sincere remorse, efforts to make amends, and prospects for leading a law-abiding life. Applicants must also include at least three written character references.

Pardon applications are processed by the Office of the Pardon Attorney under the Department of Justice, which may enlist other agencies (such as the FBI) to assist in investigating the applicant’s background. Before making a recommendation, the office considers input from relevant agencies and victims, then submits a report advising either for or against clemency. This report is reviewed and signed by the Deputy Attorney General before being forwarded to the President’s Counsel, who presents it to the President at an appropriate time for final decision.

Judged by this process, presidential clemency appears tightly constrained by procedural requirements. However, in reality, these procedures only apply to individuals who initiate self-petitions for clemency.

If the President chooses to unilaterally exercise clemency, almost no restrictions apply—except those stated in the Constitution: it must pertain to federal crimes and cannot apply to impeachment cases. In the case of Ex parte Garland (1866), the U.S. Supreme Court clearly affirmed that the President’s clemency power is "plenary and unlimited."

The reason the President holds such broad authority lies partly in colonial history, influenced by the British monarchy—since the 7th century, British monarchs have held the power to pardon criminals. It also stems from the separation of powers, designed to allow the executive branch to independently balance legislative and judicial powers, ensuring mercy can be extended when necessary to victims of unjust judgments.

The legal effects of a presidential pardon consist of two key components: first, the full or partial elimination of the imposed sentence; second, the restoration of all rights lost upon conviction, including voting and eligibility for public office or certain professions. Again, in Ex parte Garland (1866), the U.S. Supreme Court declared that a pardon “removes the guilt and eliminates its legal consequences,” rendering the recipient legally “as innocent as if he had never committed the offense.”

However, while the sentence is erased, the underlying conviction remains on record. The factual basis of the crime is not expunged, and the moral stigma associated with the offense may persist in public perception.

2. How Power Operated Behind Zhao’s Pardon

Having examined the U.S. clemency system, TechFlow now explores how this system played out in the case of Trump’s pardon of Changpeng Zhao.

Looking back to 2023, amid tightening global cryptocurrency regulations, the U.S. Department of Justice filed criminal charges against Zhao and Binance. The core charge was violation of the U.S. Bank Secrecy Act (BSA), specifically their failure to establish effective anti-money laundering (AML) and Know Your Customer (KYC) systems.

In response, Zhao entered into a plea agreement with the U.S. Department of Justice, personally paying a $50 million fine, while Binance paid a settlement totaling $4.3 billion.

In April 2024, the U.S. District Court in Seattle sentenced Zhao to four months in prison. After completing his sentence, he left the United States and stepped down permanently as CEO of Binance. Then, on October 23, 2025, Trump exercised presidential clemency to pardon Zhao, reigniting widespread attention around this seemingly concluded legal case.

This use of clemency by Trump exemplifies unilateral executive action—no petition was filed by Zhao, and Trump alone determined the rationale and motivation behind the pardon. No procedure or institution could limit the exercise of this power.

So what concrete effects does this pardon have on Zhao?

• First, Zhao has already served his entire sentence (four months imprisonment), so the pardon does not reduce jail time;

• Second, the $50 million fine Zhao paid under the plea agreement will not be refunded by the U.S. government due to the pardon;

• Third, the substantive impact lies in the restoration of professional eligibility—the so-called “restoration of rights” effect.

Under the U.S. Bank Secrecy Act, individuals with criminal records are generally barred from managing regulated financial institutions or forming partnerships with U.S. financial entities. The pardon lifts these restrictions, enabling Zhao to re-enter the crypto-financial sector—including serving as an executive in fintech firms and resuming business relationships with U.S. financial institutions.

3. Ripple Effects Across the Crypto Industry

Zhao’s pardon carries both short-term and long-term implications for the cryptocurrency industry.

In the short term, the pardon has boosted both Binance and the broader crypto market. Following the announcement, Binance’s native token BNB surged by up to 8%, with Bitcoin and other major cryptocurrencies rising in tandem, reflecting investor optimism about Binance and the industry’s outlook.

Yet uncertainty remains. Binance still faces rigorous regulatory scrutiny. Its $4.3 billion fine and operational restrictions remain in place, and re-entry into the U.S. market will take considerable effort. If Binance fails to meet compliance expectations, the short-term rally may not be sustainable. Investors should remain cautious about market corrections once sentiment cools.

In the long term, this event may signal a shift toward looser regulation under Trump. His administration frames Zhao’s pardon as ending Biden’s “war on crypto,” suggesting the U.S. could transition from cautious regulator to proactive innovator in the crypto space, reinforcing American leadership in the industry.

However, concerns over “political favoritism” cannot be ignored. Binance has close ties to the Trump family’s stablecoin project USD1, raising questions about possible “quid pro quo” arrangements. At a time when the public increasingly values regulatory integrity and independence in crypto, such actions deepen concerns about fairness and impartiality in oversight.

Final Thoughts

The pardon of Changpeng Zhao once again highlights how deeply intertwined the cryptocurrency market has become with global politics—where political shifts can directly influence market movements and long-term development.

TechFlow reminds everyone to keep an eye on global political and economic trends while thinking long-term, and to seize investment opportunities arising from post-hype market sentiment.