It’s difficult to think about any crypto company that has faced as much scrutiny as Binance has in the past year. The world’s largest and most polar exchange, Binance has dealt with significant pressure from regulators and criticism from its users.
Amid rows with different agencies, Binance’s Chief Executive Changpeng “CZ” Zhao remains optimistic his company can turn the tide and build better relationships.
Patience and Open-Mindedness Are Key to Progress
Last month, Zhao was a guest at the Future Blockchain Summit in Dubai. The summit was billed as one of the most exciting crypto events in the Middle East, and it definitely lived up to its billing. Zhao spoke about several issues, but that of regulation had him particularly engaged.
As the exchange boss explained, the world is dealing with a significant disparity in cryptocurrency regulation. While countries like El Salvador and Venezuela continue to make waves for their positive approaches toward crypto, countries like the United States and Canada are moving slowly toward progress and effectiveness. Then, nations like China and Turkey seem to want nothing to do with digital assets.
Zhao bemoaned this disparity, explaining that it won’t help improve the industry or contribute to growth; however, he also expressed his understanding that regulators want to protect their citizens.
As the exchange boss pointed out, regulators have been around for decades. Expecting them simply to adapt to the crypto industry is almost unfair, considering the potential implications of crypto friendliness. He further advocated for patience and open-mindedness, especially as regulators grapple with new aspects of the crypto space, like non-fungible tokens (NFTs) and decentralized finance (DeFi).
A Long Road to Get Here
Binance has had several issues with regulators this year alone. The exchange has faced significant problems from regulators, with many asking it to leave their shores.
CONSOB, the Italian financial markets regulator, kicked off the battles with Binance after it announced the exchange had been unregistered in the country, along with all affiliated companies, and they would need to leave Italy immediately.
In September, the exchange confirmed it would halt options and futures trading in Australia. Binance made a similar pronouncement for its Singaporean users, announcing they would soon be unable to access several functions on its platform. The block will impact different services, ranging from spot trading to deposits using the Singapore dollar. Users must stop all trading activities on Binance while its mobile apps are unavailable in the country.
Besides these areas, Binance has faced stiff criticism from regulators in Hong Kong, mainland China, Brazil, South Africa, and even the United Kingdom’s Financial Conduct Authority (FCA). Binance remains the world’s largest exchange; however, the company’s regulatory woes have gotten the better of it so far. Markets in developed countries remain the most vibrant for crypto, and locking access to Binance affects the company’s bottom line.
Leadership Changes to Improve Regulatory Relationships
Despite these issues, Binance remains committed to making progress - especially in its relationships with regulators. The exchange has committed to speaking with as many regulators as possible in efforts to stabilize operations.
Binance also has made significant overhauls to its leadership. This month, the exchange hired Mark McGinness, the former head of international relations at the Dubai Financial Service Authority (DFSA), to handle communications with regulators.
In an announcement, Binance claimed McGinness would help improve its relations with regulators worldwide. Before his time at the DFSA, McGinness headed international relations at the Australian Securities and Investment Commission (ASIC); he also has held advisory roles at the International Monetary Fund (IMF).
Speaking with news sources, McGinness explained he would be looking to leverage his experience and relationships to improve Binance’s regulatory standing. In particular, he will focus on setting the best regulatory practices and improving regulators’ understanding of the industry itself.
The Hunt for a New Home
Binance is looking to possibly set up a new corporate headquarters. This month, The Independent reported that the company set up three subsidiaries in the Republic of Ireland: Binance Technologies, Binance (Services) Holdings, and Binance (APAC) Holdings. Zhao is listed as the director of each entity.
Speaking with Reuters last month, Zhao claimed Binance wants to establish several headquarters in different parts of the world. He said Ireland is part of the company’s plans for a formal base, giving hope that it could set up shop in the European nation.
“When we first started, we wanted to embrace the decentralized principles, no headquarters, work all around the world, no borders. It's very clear now to run a centralized exchange, you need a centralized, legal entity structure behind it.”
Binance has had a torrid history with headquarters. Its holding company is currently registered in the Cayman Islands, marking the latest move by the firm. After its establishment in 2017, Binance had to move from its Chinese base as the government instituted its first crypto crackdown.
When it left China, Binance settled in Tokyo, but it spread to Hong Kong and Taiwan. It eventually moved to Malta in 2018, but the company has since had problems with the Malta Financial Services Authority (MFSA). The issues came to a head this year when the MFSA issued a statement that Binance isn’t registered to operate in the country.
Binance hopes its hunt for a new corporate headquarters will yield fruit this time. It is an important step toward establishing itself as a more legitimate entity, ready for dialogue with global regulators.