Zhao Changpeng pleaded guilty the end of the myth of borderless cryptocurrency company

Zhao Changpeng's Guilty Plea Brings an End to the Myth of a Borderless Cryptocurrency Company

Author: Emily LianGuairker, CoinDesk; Translation: SongXue, LianGuai

Tuesday marked the end of an era. Although Binance has never been a US exchange, Zhao Changpeng, the founder of Binance, resigned and admitted to violating US anti-money laundering requirements. Thus, the myth of the “borderless” cryptocurrency company has truly come to an end.

It is certain that this is not the first time US law enforcement has taken action against a non-official cryptocurrency exchange. FTX had a similar experience. But no company embodies the myth of “borderless” more than Binance, which will also pay a $4.3 billion fine to settle the US Department of Justice’s investigation.

Binance has shattered the boundaries of traditional companies. It has served traders from all over the world and ultimately became the largest cryptocurrency exchange in the world, but for a long time, it seemed like no one knew where it was located. The idea of a headquarters contradicted Binance’s overall image.

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In 2018, I asked CZ where he was based. “People still have a strong concept of your company and your situation,” he told me at the time. “A company is a concept. An organization is a concept.” When I asked him where he called home, he simply said, “I really don’t have an answer to that. Earth?”

Binance emphasizes that, apart from the smaller US entity Binance.US, its headquarters is not located in the United States. I don’t remember the last time CZ publicly appeared on US soil. But it is clear that the company is not exempt from US law. According to CoinDesk, the US accuses Binance of inadequate anti-money laundering measures, operating an unlicensed money transfer business, and violating sanctions laws.

Attorney General Merrick Garland said, “Binance has become the world’s largest cryptocurrency exchange, in part, because of the crimes it has committed. Now it is paying one of the largest corporate fines in US history.”

The US Securities and Exchange Commission and the US Commodity Futures Trading Commission have also taken enforcement action against Binance. The allegations revolve around Binance having US customers, instructing these customers on how to evade US regulations, and taking measures to hide its activities from US regulatory agencies. Some people in the cryptocurrency industry criticize the long arm of US law. Binance itself has challenged the CFTC in a filing to a US court, stating, “US law governs domestically but cannot govern worldwide.”

US law may beg to differ. In 2022, the founder of BitMEX admitted to violating US anti-money laundering laws, even though BitMEX is based in Seychelles. Then, of course, there is FTX. FTX was initially based in Hong Kong and later moved to the Bahamas. Sam Bankman-Fried was eager to succeed in the US, spending a huge amount on celebrity endorsements and sports stadium naming rights while trying to win over politicians in Washington. In the end, FTX’s global operations never entered the US, except for the much smaller and weaker FTX.US. Instead, Bankman-Fried was ultimately torn apart by US prosecutors in a US courtroom.

The United States still holds appeal for cryptocurrency businesses. Despite the growth in active regions like Asia and the Middle East, the US cannot be avoided. Do overseas exchanges have US users? Are US investors being misled? Or are CEOs holding meetings in the US?

“The regulatory burden is not very high,” former Manhattan federal prosecutor Samson Enzer told the Wall Street Journal last year. “The government would argue that if an email passes through New York, that’s enough.”

We may never see another company like Binance. Cryptocurrencies themselves may be borderless, but cryptocurrency companies may increasingly find it difficult to operate beyond legal or geographical boundaries. In the early days of cryptocurrency, it seemed possible to launch a large exchange that was not subject to any jurisdiction. Those days are long gone.

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