Is Binance Giving In to Regulatory Pressure to Raise Funds?
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Is Binance Giving In to Regulatory Pressure to Raise Funds?

Binance.US has been struggling to raise $100 million due to regulatory concerns from investors.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

Binance has been witnessing worldwide regulatory pressure lately. Numerous jurisdictions accused the cryptocurrency exchange of operating unlicensed businesses, with dozens of regulatory bodies filing non-compliance complaints.

To counter these regulatory concerns, Binance announced that it would double the size of its compliance team by year-end. Binance CEO also claimed that the company would become fully compliant, and even took some steps by enhancing the daily withdrawal limit for unverified users.

However, despite all the efforts, it turns out that Binance.US has been struggling to raise $100 million due to regulatory concerns. Now, the firm adds even more strict KYC obligations, presumably to address the regulatory concerns. 

Binance Struggling With Regulators 

Since June 25, Binance has been under pressure by regulators from across the globe. Initially, the Japanese Financial Services Agency (FSA) accused Binance of operating unauthorizedly, saying it was not registered within the country.

Following FSA, the UK’s Financial Conduct Authority (FCA) declared that Binance is not allowed to offer any regulated business in the UK unless the regulatory body grants it a written consent. Arguably, this prompted UK banks like Barclays to halt user transactions to Binance.

Subsequently, Thailand’s Securities and Exchange Commission proclaimed that Binance was operating without a license, filing a criminal complaint against the crypto exchange. The Thai SEC claimed that it had warned Binance about the non-compliance, but received no response.

Other countries, including the US, Italy, Germany, Canada, and others, have also accused Binance of operating without a license. Most recently, on August 18, the Dutch central bank said in a warning that Binance is operating in the Netherlands without an appropriate license.

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Binance Fails to Raise $100 Million

After receiving various allegations and non-compliance complaints from regulators across the globe, Binance started taking serious steps to become fully compliant. In the first step, the company unveiled that it would double the size of its compliance team.

Binance also took some steps to become more appealing to regulatory bodies. In an official announcement on July 27, Binance informed customers that the withdrawal limit for unverified users would drop to 0.6 Bitcoin by mid-August. 

However, despite all these efforts, the company seems to be having trouble attracting investors. Binance.US is set to close its funding round, though sources say the company has failed to raise the expected $100 million. 

When Brian Brooks left his position as CEO of Binance.US earlier this month, he cited “strategic differences” as the reason for the move. However, media outlets are now speculating that part of the “strategic differences” may include the failed mission to raise $100 million.

In July, Binance CEO Changpeng Zhao said Binance.US is slated to go public. CZ said:

“Binance US is looking at the IPO route. Most regulators are familiar with a certain pattern, or having headquarters, having corporate structure. But we are setting up those structures to make it easier for an IPO to happen.”

The New York Times has claimed that the Brooks-led deal is the first step for Binance.US to go public. Reportedly, investors have been staying away due to regulatory concerns. Part of the problem is that Changpeng Zhao holds a 90% ownership stake in Bianance.US, which is worrying to some investors. 

Crypto Exchange Fundraising is Red Hot in US

Coinbase, which went public on NASDAQ in April, was valued at around $100 billion. This valuation made Coinbase comparable to Goldman Sachs, a leading global investment banking firm. Further, another cryptocurrency exchange, FTX, raised $900 million in July, gaining a valuation of $18 billion.

The fact that Coinbase and FTX gained such huge valuations is an indication that the market for crypto firms is hot in the United States. As covered by The Tokenist, PwC’s crypto lead, Henri Arslanian, asserted that there is even some degree of competition among VCs when it comes to crypto firms — further approving that there is exceptional interest in crypto firms.

Arslanian said:

“Let’s say they’re looking at a deal and they believe it’s worth $10 million, and you’re seeing large VCs come in and put a bid in for a higher valuation. This is happening a lot with very early-stage companies, say, $5 million to $20 million — the prices are being inflated.”

Arguably, Binance.US wants to enjoy this huge interest and raise a significant amount of funds, though the regulatory obstacles have been driving away investors. However, the company is determined in its decision to increase KYC and AML requirements — probably to make investors change their minds.

A recent update to Binance services requires all users to “complete Intermediate Verification to access Binance products and service offerings, including cryptocurrency deposits, trades and withdrawals.” The “Intermediate Verification” by Binance requires users to submit a Government ID and pass facial verification.

While Binance resumes embracing regulations, it remains to be seen whether high-profile investors show interest in the crypto exchange, and whether it manages to raise a significant amount of funds.

Do you think Binance.US would gain a huge valuation like Coinbase and FTX? Let us know in the comments below.

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