Cryptocurrency exchange Binance wants to ‘be a financial institution’, seeks licences to undo regulatory red flags
- ‘In the last four years, we were a start-up. Now, we want to be a financial institution,’ CEO says
- Exchange subject to regulatory warnings, investigations and bans in jurisdictions ranging from the US and the UK to Hong Kong
Binance, the world’s largest cryptocurrency exchange, said it was seeking licences and multiple headquarters in response to a slew of warnings issued in several jurisdictions this year.
Zhao Changpeng, the exchange’s CEO, even raised the prospect of being succeeded by a global executive with a strong regulatory background to help Binance pivot towards becoming a regulated financial institution. The start-up was on the lookout for such a candidate but Zhao, who has been CEO for four years, did not say when he would step down.
“In the last four years, we were a start-up. Now, we want to be a financial institution,” he said during a media conference call late on Tuesday.
06:54
Is cryptocurrency too risky for China?
But the exchange claimed it has been making efforts to combat money laundering and suspicious fund flows. These include lowering its daily withdrawal limit to US$2,000, from two bitcoin a day, according to Samuel Lim, Binance’s chief compliance officer. Bitcoin was trading at US$39,807 on Wednesday.
“We continue to build a robust compliance programme,” said Jonathan Farnell, director of compliance at Binance. This will include adopting the same anti-money-laundering principles that other financial institutions follow, he added.
02:27
Cryptocurrency volatility highlighted by China’s recent crackdown and Elon Musk comments
That has made it challenging for Binance to attempt getting a licence in Hong Kong, according to Gaven Cheong, a partner at law firm Simmons & Simmons. “Ultimately, if they have to admit that they had done things in breach of the Securities and Futures Ordinance in Hong Kong, this may affect the regulator’s view of whether they would be fit and proper as defined under the ordinance to be licensed in Hong Kong,” he said.
Regulators globally have been clear about what constitutes a security, which remains a regulated activity in many jurisdictions and cryptocurrency industry players should be expected to play by the rules, said Henry Chong, the CEO of Fusang Corp. The start-up owns Fusang Exchange, which runs a licensed digital stock exchange that offers the trading of security tokens in Labuan, a special economic zone in Malaysia.
“While there is no question about what constitutes a security, there is definitely room for more regulatory clarity about what constitutes a security token. Some of the security tokens offered by cryptocurrency firms today are more akin to complex derivatives, rather than shares,” Chong said.