Binance CEO: BitMEX indictment is ‘wake-up call’ for cryptocurrency industry

October 21, 2020, 3:45 PM UTC

Earlier this month, the U.S. Justice Department charged the owners of BitMEX, a high-flying, Hong Kong–based cryptocurrency exchange known for its fast-and-loose approach to the law, with violating anti–money laundering rules. The event—one cofounder, Samuel Reed, was arrested in Massachusetts, while three business partners remain at large—has caused cryptocurrency entrepreneurs to do some soul-searching and to reassess the soundness of their own operations.

The chief executive of Binance, Changpeng Zhao, who goes by “CZ,” joined Balancing the Ledger, Fortune’s show about the intersection of finance and technology, to discuss the industry’s reactions to the case. The conversation also touched on a general rebounding of interest in cryptocurrency amid the effects of governments’ handling of the coronavirus pandemic.

Zhao said he was surprised to learn that federal prosecutors had taken on BitMEX. The indictment “is a wake-up call for the rest of the players to be more cautious, to be fully compliant,” he said.

“Back in the summer of ’15, you could probably do anything because there was no regulatory [guidance],” Zhao continued. “But I think by 2018 and in the last couple of years, there has been a lot of regulatory guidelines.”

There was once a time when industry watchers described Binance as the hungry up-and-comer prone to putting growth before compliance. The three-year-old company’s relentless focus on expansion helped it quickly swell to become the world’s largest cryptocurrency exchange, vaulting ahead of peers that had gotten their start years earlier, even as its headquarters hopped from jurisdiction to jurisdiction.

But Binance has been buttoning up its act since regulators have gotten stricter with enforcement. Last year the company created a separate counterpart, headquartered in San Francisco, to cater to U.S. customers and the niceties of the country’s securities laws. (You can watch Fortune’s 2019 interview with Binance U.S. CEO Catherine Coley here.)

“From our perspective, we just want to maintain a very careful and fully compliant structure,” Zhao told Fortune of Binance’s aims. “We want to be sure that we recheck our compliance mechanisms. We want to make sure that we don’t serve any U.S. users.”

Binance is being careful to make sure “we’re not stepping on anybody’s toes,” Zhao said.

If Zhao is taking a more cautious approach, the change doesn’t appear to be impeding business. The company recorded its best ever quarter this weekend as the volume of “futures” traded on its exchange increased by 44%, per crypto blog The Block. The jolt is due in part, no doubt, to traders fleeing BitMEX, which has long specialized in such derivatives markets.

Interest in cryptocurrencies like Bitcoin is mounting once again in tandem with anxiety over the economic effects of COVID-related stimulus programs. Meanwhile, recent developments in “decentralized finance,” a hot segment of the cryptocurrency field, are attracting newcomers.

Despite the ravages of the coronavirus pandemic, these trends are benefiting Binance. “We’re now seeing all-time-high traffic,” Zhao said.