Binance, one of the world’s largest cryptocurrency exchanges has been hopping in and out of several countries in search of the right regulatory environment for cryptocurrency trading, stated many cryptocurrency executives, according to Decrypt Media.
In the past two years, the exchange has seen its core-operations move in and out of China, Japan, Singapore, Bermuda and now, has shifted to the island nation of Malta. The report stated that this constant shuffle was for regulatory comfort and not for a better-decentralized model.
Ari Paul, CIO and managing partner of Blocktower Capital, called this regulatory chase one that the exchange will continue until it reaches its goal of “diplomatic immunity” with a compliant government.
The claim made by Paul could be attested by the exchange’s own words. In a March 2018 Medium Post, Binance stated:
“Any country that can attract Binance to open a branch in their location will receive a handsome tax income revenue.”
Prior to the China crackdown on cryptocurrency companies, Binance looked to shift its operations to Japan, but was met with the iron fist of the country’s Financial Services Agency. Binance was initially operating without a license, but the FSA issued a warning to the exchange on the grounds of failing to perform identity checks of their Japanese investors.
Even when it comes to their native token Binance Coin [BNB], cryptocurrency executives are not fully convinced, especially from a regulatory standpoint. The exchange maintains that the token is separate from the workings of the exchange, but some, like Scalar Capital’s co-founder Linda Xie, view this as a more mainstream financial product. She said,
“I have some concerns on the regulatory side with BNB, because you have this pseudo-equity model, where you have the cash flows of the company that are kind of tied to the valuation of the token. You have this situation where they’re taking their cash flows, they’re buying up BNB and then burning it.”
Xie added that there were definitely negative regulatory implications for the exchange with respect to their token due to the seemingly direct valuation link between the two. She further added that Binance dodging regulations was a reason for its success, but will also be a flaw in the long-run.
Paul added to his earlier point stating that Binance’s scurry from country to country will continue until it finds a nation that allows it “diplomatic immunity”. He added:
“They’ve been cozying up to some of the government they’ve been working at. I think the way they end up evading regulatory accountability is probably something like regulatory capture at the national level—like, capturing the regulators of a place like Malta or Singapore and getting literally an ambassadorship or government post.”
In October 2018, the investment fund of the Singapore government funded Binance’s expansion in the country. Vertex Ventures, a limited partner with Temasek Holdings, the wealth fund of the city-state backed the Binance Singapore project to push its expansion into Southeast Asia.
Furthermore, with regulatory pressure climbing, Binance, in September 2018, moved to Malta and subsequently signed a Memorandum of Understanding [MoU] with the country’s national stock exchange. The move was due to the country’s positive attitude to blockchain and cryptocurrency.
During the move Changpeng Zhao, the CEO of the exchange, stated:
“So we are registered in multiple locations and we have people in multiple locations. That way we will never be affected by one regulatory body.”
Kyle Samani, the managing partner at Multicoin Capital, questioned the regulatory recourse financial watchdogs could take if they do find malfeasance on Binance’s part. Samani said,
“One of the biggest challenges right now, if you’re a regulator out there, is it’s unclear how enforce meaningful penalties on Binance.”
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