CryptocurrencyWeb3NFTsInvestingBitcoin

Binance CEO walks back suggestion he’s ready to step down from world’s largest crypto exchange

July 28, 2021, 8:41 AM UTC

Binance, the world’s largest cryptocurrency exchange, is “very open” to a new CEO as the platform looks to transform into a regulated financial entity amid heightened regulatory scrutiny worldwide, said CEO and founder Changpeng Zhao, known as C.Z., in a Tuesday press conference.

“We are looking for someone with a strong regulatory background to step in and be CEO. I’ll always contribute to Binance and the BNB [Binance coin] ecosystem… [but] I don’t have to be CEO to do that,” Zhao said.

But a few hours after the briefing, Zhao clarified on Twitter that there are “no immediate plans” for the succession. “CEO contingency planning starts in Day 0, same as any other role. I feel CEOs should not stay for more than 10 years, ideally around 5 years. We live in a dynamic world. We need new thinking,” Zhao wrote. He has been CEO for four years.

Binance is applying for licenses in multiple jurisdictions, as part of its plan to become a regulated financial institution. Domiciled in the Cayman Islands, the currently headquarter-less firm will establish several regional headquarters around the world; the locations have yet to be determined. Binance will also ramp up its hiring of compliance experts worldwide; it plans to double its team by year-end. The company did not respond to a request for comment.

Binance is shifting operations as it garners more attention from global regulators. The U.S. Justice Department, Internal Revenue Services, and other agencies are investigating the company for ties to money laundering and tax evasion. Last month, the U.K.’s financial regulator banned Binance from undertaking “any regulated activity” in its jurisdiction. In May, the company withdrew its application to register with the U.K. regulator when it was unable to meet anti-money laundering requirements.

In recent weeks, Japan’s Financial Services Authority sent Binance a warning for operating without authorization; Thailand’s Securities and Exchange Commission filed a criminal complaint against the company for the same violation. Even the Cayman Islands’ financial regulator warned Binance that it is not authorized to operate a crypto exchange from its jurisdiction.

On Tuesday, Zhao restated the company’s stance towards regulatory compliance, saying: “Longer term, playing within the rules, 100% compliant. It’s much better to play within the confines of that. That trade-off is very, very clear.” Earlier this month, the CEO said in a blog post that the exchange hasn’t “gotten everything exactly right… but [we] reiterate our commitment to partner with regulators. Compliance is a journey—especially in new sectors like crypto.”

Founded in 2017, Binance is now a major player in the crypto-verse. It’s the top crypto exchange by trading volume and the firm issues Binance Coin, the fourth-largest cryptocurrency worldwide with a market capitalization of nearly $54 billion. Prior to founding Binance, CEO Zhao was chief technology officer of China-based OKCoin, which was at the time the No. 2 exchange globally by trading volume.

Compared to its rivals, Binance has historically taken a more lax approach to regulation and offers riskier products such as crypto derivatives. Coinbase and Huobi, which rank in the top three crypto exchanges worldwide alongside Binance, operate with regulatory licenses. U.S.-headquartered Coinbase is regulated by the SEC and doesn’t operate as a derivatives exchange. Huobi has licenses to operate legally in Japan, South Korea, Thailand and Gibraltar, among other locations. Kraken, headquartered in the U.S., is the fourth-biggest exchange and is overseen by regulators in the U.S., U.K, Canada, Australia, and Japan.

Despite such oversight, a recent study by the London School of Economics says that only four out of the world’s 16 leading exchanges are subject to a “significant level of regulation related to trading”—which is the core activity of exchange platforms. Coinbase, for instance, operates as a licensed ‘Money Service Business,’ meaning that while it must register with regulators in the U.S. and U.K., “it does not mean their trading activities are regulated.”

The recent moves by Binance however, are “definitely telling that greater compliance with trading regulation is becoming the norm. We’ve seen similar moves from other trading venues such as Bitmex, Huobi and OKEx to enable more stringent [know your customer] requirements, deeper on-chain analysis for transfers and working with local regulators,” says Justin d’Anethan, head of exchange sales at EQONEX, a cryptocurrency exchange.

“With crypto gaining popularity and becoming ever-present in institutional trading strategies and portfolios, it’s highly likely that regulators will look at the space more and not less,” says d’Anethan.