Start-up to a regulated financial institution, Binance embraces global compliance
Binance Holdings Limited has been subjected to regulatory scrutiny across jurisdictions quite often lately. Globally, regulators are duly checking if or not Binance is operating as a licensed, registered, and regulated crypto exchange. Ensuring consumer protection and curbing illicit activities are major regulatory interests of the authorities. Regulators have objected to Binance, without first seeking licenses, permitted the residents of various jurisdictions to trade. These include Cayman Islands, Japan, Malaysia, Malta, the Netherlands, Thailand, and the United Kingdom (UK).
Emerging as a true market leader, the world’s largest cryptocurrency exchange has embraced a new organizational establishment stance. Binance CEO Changpeng Zhao has shared interesting details about the cryptocurrency exchange’s future growth plans. Getting interviewed by South China Morning Post (SCMP) on September 16 (2021), Zhao discussed operating as a licensed financial institution. He expressed plans of Binance transforming into a globally regulated crypto exchange with centralised headquarters.
Moving forward, Zhao says Binance would maintain “clear records of stakeholders’ ownership, transparency and risk controls.” But, centricity in itself is a conceptual antonym of the very nature of blockchain technology—“to disintermediate centralised authorities.”
Apparently, organizing a centralised entity with dedicated headquarters would potentially negate the foundational rationale of blockchain. Binance has related entities with Cayman Islands incorporations but their operations don’t pertain to cryptocurrency.
Crypto exchanges’ soaring market capitalization has reached US$2 trillion (Binance’s own trading volume is US$2 billion), pinging the regulators to act. Now, operating merely by “hosting their matching engines on the cloud or by operating without a registered office” is not enough, SCMP reports.
Binance is mindful of the augmenting regulatory scrutiny as it plans to set-up multiple global headquarters. It also intends to apply for licenses in every jurisdiction where it operates.
Binance is also boosting its compliances and resources’ strength. It has already discontinued or limited its high-risk products. Cryptocurrency margin trading also is not permitted in particular currencies. New users’ trading leverage for cryptocurrency futures is also curtailed. Binance’s futures and derivatives products are not offered in Germany, Italy, and the Netherlands. Limited access is available for new derivatives products in Hong Kong and Australia.
Given the mounting transparency and illicit activity concerns pertaining to the cryptocurrency sector. The Financial Action Task Force (FATF) and other EU and U.S. authorities advocate standard regulation and supervision for the cryptocurrency sector. These authorities want crypto exchanges to have minimal jurisdictional leeway.
Binance has revised customer verification requirements for fresh and incumbent customers. These customers should now submit government ID and succeed in a facial verification for the “Intermediate” verification level. Only then can they use Binance’s products and services.