Why is Binance Facing So Much Worldwide Regulatory Pressure?
For the past few weeks, Binance has been consistently making headlines over increased regulatory scrutiny and new investigations by regulatory bodies from across the globe. In fact, this is happening so frequently that Binance has announced plans to double the size of its global compliance team by the end of the year. But what has triggered such scrutiny to occur right now?
A Summary of Binance’s Most Recent Regulatory Troubles
Binance’s recent issues with regulators began on June 25th, when the Japanese Financial Services Agency (FSA) warned Binance that they were unauthorized to operate within the country because they did not register their exchange. On the very same day, Binance announced that it would be leaving Canada’s Province, Ontario, over regulatory worries.
Just one day later, the exchange found itself in the UK’s crosshairs, as the Financial Conduct Authority (FCA) announced that it “is not permitted to undertake any regulated activity in the UK” until it receives written consent from the regulatory body. This has resulted in UK banks, such as Barclays, preventing users from sending their funds to their accounts.
On July 2nd, Binance faced yet another setback, as Thailand’s Securities and Exchange Commission announced that the company was operating without a license, which is a requirement for any digital asset trading platform in the country. The Thai SEC reportedly brought this to Binance’s attention in April, but received no response.
On July 6th, Binance suspended EU SEPA bank transfers, citing “events beyond our control”. And on July 7th, it was revealed that the exchange had not registered with the Cayman Islands Monetary Authority (CIMA), triggering an investigation, suggesting this could be the possible reason, as this is supposedly where the exchange operates from.
The global situation is not looking good for Binance. Although most of the company’s run-ins have involved the platform’s crypto trading, it is also worth noting that Binance’s newly released stock trading platform was also under scrutiny back in April from both Hong Kong and the EU.
What Has Triggered Binance’s Regulatory Scrutiny?
In an open letter published on July 7th, Changpeng Zhao (CZ), CEO of Binance spoke about the “recent hyper-focus on regulation” that the exchange has been facing. In it, he compared crypto regulations to the early days of the automobile, noting that:
“When the car was first invented, there weren’t any traffic laws, traffic lights or even safety belts. Laws and guidelines were developed along the way as the cars were running on the road. These are frameworks and laws we take for granted today that allow this powerful technology to be used widely and safely. Crypto is similar in the sense that it can be accessible for everyone, but frameworks are required to prevent misuse and bad actors.”
Essentially, his argument is that as the crypto industry matures and gets more complex, so, too will the regulatory hurdles, and that this should be welcomed as it helps protect from malpractice and malicious behavior. This type of maturity is being seen in the EU with its proposals for more scrutiny towards stablecoins, and its aim to reduce volatility through organic growth. It may also be visible in the US, where the SEC is currently attempting to grapple with the nature of DeFi projects.
Although the recent headlines regarding Binance might suggest that the organization is either ignorant or dismissive of regulatory rules, the exchange has a suitable track record of working with police authorities. For instance, on June 24th, Changpeng Zhao tweeted that the company had received a “Letter of Commendation” from the UK South East Regional Organised Crime Unit for preventing the sale of Class A drugs on the dark web.
Changpeng Zhao’s open letter also detailed how the exchange would overcome its recent regulatory pressure, and restore users’ faith, such as by expanding its compliance team, and localizing its operations to align with local regulators and authorities. Although, it still might take a while before Binance is as functional as it was some months ago, before these issues arose.
Do you think Binance will survive its global regulatory pressure? Let us know in the comments!