The Evolution of Binance From Founder to Professional Manager Era, Compliance is More Important Than Innovation

The Transformation of Binance From Founder to Professional Management, Prioritizing Compliance Over Innovation

Author: 0xSea.eth, Source: Author’s Twitter @_0xSea_

Zhao Changpeng resigned, Binance CEO takes office, fined a sky-high amount to US regulatory authorities… A lot of information.

For the entire crypto industry, this can be considered the final shoe dropping. Since BTC and ETH reached their all-time highs in November 2021, the market has experienced a series of exhausting events over the past two years, including Luna crashing, 3AC fraud, bankruptcies of Celsius and Voyager, the collapse of FTX, and Silicon Valley Bank’s bankruptcy causing USDC to become detached… And many more draining incidents.After these bubbles and scandals burst, many people worried about Binance, mainly for two reasons: one, the fear that the government would demand the closure of Binance, and two, concerns about user funds similar to what happened to FTX. Now, looking at the situation, neither of these extreme scenarios has occurred. In exchange for paying a whopping $4.3 billion fine, Binance can continue operating as an offshore exchange.

CZ emphasizes in the statement that the regulatory agencies have not accused Binance of misappropriating user funds or manipulating the market. This is completely different from what SBF did at FTX, which ultimately led to his trial and conviction.I read an article speculating that CZ might still face sentencing, but I think it’s unlikely. This stepping down + paying the fine is a long and full-fledged negotiation deal, and one of the conditions included in this deal is no jail time.

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Seeing @heyibinance’s response in the WeChat group, the SEC’s civil lawsuit against Binance will continue, just like with Ripple. Compared to criminal lawsuits, civil lawsuits are likely to be resolved with a payment, without much further trouble. Binance has strong profitability. Coinbase’s Product Manager Conor Grogan revealed a set of data showing that with Binance’s financial strength and reserves, they can easily afford to pay a $4.3 billion fine without selling crypto assets (without crashing the market).

In addition, CZ is still the largest shareholder of Binance. So it’s practically impossible for him to “not participate in Binance’s operations.” It’s just a change in approach. The regulatory authorities also need his stance and concessions. Perhaps this is a better choice, just like Zhang Yiming and Huang Zheng (both of whom are major shareholders in their own companies) chose to retire while in their prime, enjoying a wide range of opportunities and having more time to focus on cutting-edge fields.

A friend of mine started a cryptocurrency exchange in the previous cycle and he told me that during his entrepreneurial period, the pressure of intense market competition and the constant worry about asset security made it difficult for him to sleep well. Having a huge fortune but lacking freedom comes at a greater cost than many people imagine. CZ is now free, congratulations to him!

Now, the person at the helm of TikTok, Zhou Shuzi, is a Singaporean Chinese, and the newly appointed CEO of Binance, Richard Teng, also has a professional background keyword in Singapore, namely “compliance.” Within the context of the East-West struggle, the positioning of Singaporeans as bridging the East and West can be considered their core competitive advantage. As Binance transitioned from the founder era to the professional manager era, in the next 6 years, compliance may be more important than innovation.

The form of exchanges is quite interesting, as it is often the first stop for most users entering the world of Crypto. Its business model is similar to that of internet companies. Not only for users, but also for many professionals, the first stop in the industry is centralized exchanges, where they first establish themselves before entering the world of blockchain. With Binance being fined, compliance has become the main theme for exchanges, not only serving as a deterrent to other CEXs, but also putting pressure on the business scope of exchanges. Binance’s current business portfolio is too massive, will it be split into multiple subsidiary companies like Alibaba in the future?

The top 20 centralized exchanges worldwide are basically dominated by Chinese entrepreneurs, which is quite interesting. Compared to the innovative Web3, the exchange business in the Web2 model is solid, down-to-earth, and not driven by narrative. This is the advantage of Chinese entrepreneurs and developers.

Several exchanges this year have been actively promoting Web3 wallets, seeing the trend of user behavior and asset digitization, and transforming themselves. The industry focus is shifting towards DeFi, and CZ also said that they will pay more attention to DeFi in the future, after all, regulations have not reached that far yet. Asset digitization is one step closer to CZ’s vision of “Freedom of Money” proposed within Binance in 2018.

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