Changpeng Zhao, CEO of the largest crypto exchange Binance, admitted that his company needs a centralized governing body for a normal dialogue with financial regulators.
Recall that this year Binance came under attack from regulators due to the fact that it essentially does not have a central office and address in the official jurisdiction of any region of the world. Under pressure, the exchange was even forced to introduce a mandatory identity verification procedure for its customers. Let’s talk about what is happening in more detail.
Note that the consequences of problems with global regulators became noticeable back in the summer. For example, at the end of July, Changpeng Zhao announced that he was looking for a replacement for himself as the CEO of the exchange.
At the same time, he stressed that he did not plan to leave the organization, but at the same time considered it normal to change leaders every five years.
According to Changpen, he will always find a way to help the crypto community, whose logo is tattooed on his arm. Since then, the main Binance has not changed, but now the company will be forced to change its structure.
What will happen to Binance?
According to Decrypt reporters, Zhao «gave up» in his beliefs about decentralized management of the company: after all, such a model of work will never satisfy the requirements of financial regulators. Here’s a quote from a recent interview with the South China Morning Post.
We came to the conclusion about the need for a centralized organization in order to efficiently interact with the regulatory authorities.
Indeed, in the past few months alone, Binance has received warnings from the relevant authorities in the UK, Italy, the Cayman Islands, Malaysia, the Netherlands, Singapore and Japan.
The Netherlands’ central bank and Japan’s Financial Services Agency have warned of Binance’s customer protection concerns. That being said, the Cayman Islands Monetary Authority and Italian regulator Consob said the exchange was not licensed in their respective jurisdictions. The Malaysian Securities Commission also recently took enforcement action against Binance for illegal activities in the country.
Binance CEO Changpeng Zhao
In the UK, the Financial Conduct Authority first issued a consumer warning about Binance Markets Limited (BML) in June. As a reminder, BML is a Binance company acquired to manage a branch of a crypto exchange specifically in the UK. FCA did not like this gesture and the agency is not going to wind down the claims. Here is a quote from the regulator’s representatives.
The FCA believes that the firm’s responses to the claims were incomplete and included outright denials of information. This also includes the inability to provide data on the exact organization of the company.
Accordingly, the “inferior” by classical standards model of company management does not suit regulators even now. That is why their actions also hint at the need to correct this situation.
Looking forward to seeing the first Binance headquarters
Zhao himself has not yet announced the location of Binance’s future headquarters. But there seems to be no turning back: the regulators have managed to «persuade» the CEO of the need for centralization. For comparison, here’s a quote from him at the Ethereal Summit in May this year.
The definition of headquarters is different for everyone. Our leadership team does not sit in one place, we do not have a clear governing body where to go.
Binance has chosen its own path – in order to remain in the cryptosphere, the company will have to become more centralized and transparent to regulators. This is likely to displease many of the exchange’s clients who value their anonymity. In this regard, it can be assumed that in the coming years, decentralized exchanges with an emphasis on anonymity could capture a significant share of trading volumes in the cryptocurrency niche.
We believe that there is nothing wrong with the need to establish a central office for the Binance exchange. Obviously, otherwise, the regulators will not ignore the platform, and this in the long term will create much more problems than the mandatory confirmation of identity that has already been introduced. In addition, cooperation with governments of different countries will improve the reputation of cryptocurrencies in the eyes of people unfamiliar with the industry. Finally, privacy lovers will still have decentralized exchanges that will continue to be active.
