Zhao Changpeng’s amputation, Binance enters the era of comprehensive compliance

Zhao Changpeng undergoes amputation, Binance embraces comprehensive compliance era

Binance enters the “post-CZ” era, what can we expect?

By: Joe, Foresight News

After being the CEO of Binance for six years, Changpeng Zhao has finally decided to “let go” and allow Binance, the world’s largest cryptocurrency company, to enter the “compliance era”.

On November 22, 2023, Changpeng Zhao tweeted that he has resigned as the CEO of Binance and announced that Richard Teng, the former Global Head of Markets at Binance, will take over as the CEO. Richard Teng later expressed in a tweet that he will cherish the trust of 150 million users and thousands of employees and take up the responsibility.

• Collision of opposing views Where will Binance go after the regulatory storm?
• The Director Who Conquered Crypto
• LianGuai Morning News | Prosecutors ask to prevent CZ from returning to the UAE before sentencing. Gray scale plans to change GBTC code to BTC.

If Changpeng Zhao’s six years at Binance left the impression of rapid growth, breaking rules, and a hero who doesn’t care about origins, then the Binance of the Richard Teng era hopes to bring the impression of order, stability, and compliance to the market.

Richard Teng (left) and Changpeng Zhao (right)

In six years, Changpeng Zhao has turned Binance into a super unicorn with 150 million users worldwide. During good market conditions, the daily trading volume on the platform (18 trillion yuan) surpasses the daily trading volume of the Hong Kong stock market or the Shanghai and Shenzhen stock markets.

Unlike Richard Teng, who dresses in a traditional suit as a finance professional, he prefers to wear a hoodie and carries the fearless spirit of a programmer who wants to change the world, breaking free from the shackles of the traditional financial world. When the size and influence of Binance finally caught the attention of the traditional financial world, it also meant that it had to enter the next new era of its existence.

Changpeng Zhao “sacrifices”, Binance enters the “Richard era”

“I made a mistake, and I must take responsibility.” Changpeng Zhao said in a tweet on November 22.

According to court records, the mistake Changpeng Zhao referred to in his tweet was the three criminal charges faced by Binance, including conducting unauthorized money transfers, conspiracy charges, and violations of the International Emergency Economic Powers Act.

Binance has paid a high price for this. It not only had to pay a $4.3 billion fine to four US regulatory agencies, but also faced crackdowns on various business developments by regulatory agencies over the past year, with many businesses and markets being banned. Due to the US government’s crackdown in the past year, Binance has lost most of its market share in the United States to compliant local enterprises like Coinbase and Robinhood. Binance’s most important business, BUSD stablecoin, which was once the world’s second-largest stablecoin with a market cap of over $20 billion, is now almost worthless.

As for Zhao Changpeng, his cost is leaving Binance, paying billions of dollars in fines and bail, and facing a sentence of no more than 18 months. Bloomberg reported that Zhao Changpeng faces a maximum of 10 years in prison, but according to the plea agreement, the sentence is expected to be no more than 18 months.

In addition, Binance will also face a lawsuit with the SEC. However, Binance co-founder He Yi responded to subsequent regulation by saying, “The SEC is a civil litigation, and it will be a slow legal battle like Ripple.”

After paying these costs, Binance finally “puts its foot down” and can start over, entering the Richard era of Binance. According to He Yi, Binance becomes a “compliant Binance” and opens a new chapter.

This may be an important turning point for Binance, as it enters the “Richard era” or the “era of comprehensive compliance.” This also means that Binance has finally dealt with the hidden dangers brought about by non-compliance during its six years of development and is setting sail again.

Binance’s new CEO, Richard, has a background that fully demonstrates Binance’s desire to enter the mainstream compliant market. Richard Teng, 52, has held senior positions at the Monetary Authority of Singapore, Singapore Exchange, and the Abu Dhabi International Financial Centre, with extensive traditional financial background and experience in dealing with global financial regulation.

Since joining Binance as CEO of Binance Singapore subsidiary in May 2021, Richard has been promoted to Binance’s Head of Global Regional Markets and eventually became Binance CEO in just over two years.

During these two years, especially in 2023, Binance has accelerated the compliance of cryptocurrency exchanges globally.

Previously, Binance has been actively embracing compliance, but due to its low degree of compliance, it has been under regulatory pressure. For example, Binance’s independently operated US subsidiary, Binance US, was a key focus of the SEC for a long time. Catherine Coley, the former CEO of Binance.US from 2019 to 2021, stated in SEC testimony, “Wallets and custody agreements are things that I wanted to have at least an American involvement with so that we could control the custody of the tokens, the storage of the data, and the ability to interact with the original data in real-time.”

In addition to Binance US, Binance has also actively entered multiple countries worldwide to establish compliant exchanges.

In August 2023, Binance’s compliant cryptocurrency exchange, Binance JaLianGuain, was officially launched in Japan. As of now, the total number of tradable tokens has increased to 47. Binance JaLianGuain has also partnered with Mitsubishi UFJ Trust and Banking, Japan’s largest commercial bank, to jointly research and issue new stablecoins, including yen stablecoins and dollar stablecoins.

Similarly, in August 2023, Binance was approved to become the “first fully licensed” cryptocurrency exchange in El Salvador. And in October of this year, Binance Latin America vice president Min Lin stated that the trading platform intends to be regulated in Argentina. Their product, Binance LianGuaiy, allows users from nine countries including Argentina, Mexico, and Colombia, to directly transfer crypto funds to bank accounts.

“The era of compliance” is coming, and the reshuffling of the cryptocurrency industry is accelerating

In fact, since the collapse of FTX, global cryptocurrency exchanges such as Binance, OKX, and Bitget have all accelerated their compliance processes. Furthermore, ETFs, stablecoins of multiple countries’ currencies, tokenization of US bonds, and other compliant cryptocurrency businesses are on the verge of large-scale application.

Take Hong Kong as an example. In order to obtain the Hong Kong compliant cryptocurrency license, major cryptocurrency exchanges are showcasing their talents. Almost every major cryptocurrency exchange wants to establish a presence in Hong Kong with a compliant cryptocurrency license. Obtaining a cryptocurrency license and integrating into the mainstream financial world means attracting more new users from the traditional world to enter the cryptocurrency market. ETFs, stablecoins pegged to the yen or Hong Kong dollar, tokenization of US bonds are all tools to attract new capital and new users. They will become new customers and sources of business for cryptocurrency exchanges.

According to the official website of the Hong Kong Securities and Futures Commission, OKX submitted its license application on November 16th. According to Foresight News on November 14th, in the year 2023, the BGX cryptocurrency group under Bitget strategically invested in BC Technology Group, the parent company of OSL, a licensed cryptocurrency exchange in Hong Kong, by subscribing to approximately HKD 710 million in new shares. This marks their official entry into the Hong Kong compliant cryptocurrency market. As for Binance, an insider informed Foresight News that there are numerous connections between Binance and HKVAEX, which is currently applying for a cryptocurrency business license in Hong Kong.

Industry insiders speculate that the market share of non-compliant cryptocurrency exchanges will continue to be eroded and squeezed by compliant cryptocurrency exchanges with government regulatory licenses. 2024 is the “year of compliance” for cryptocurrencies.

However, compliance is a race with high costs. Foresight News once analyzed that setting up a compliant cryptocurrency exchange requires between HKD 20 million to HKD 200 million, and that’s just the initial cost. They also need to bear the pressure of low revenue for a long period of time.

Even if they bear the revenue pressure, it is not easy for non-compliant cryptocurrency exchanges to “localize” themselves. They need to enter new competitive markets, which may not be the environment they are accustomed to. Taking the US market as an example, local compliant cryptocurrency exchanges like Coinbase and local brokerages like Robinhood are competing for cryptocurrency businesses. They are more familiar with local financial regulatory rules, which brings great difficulty for foreign cryptocurrency exchanges to enter the local market.

Using Binance as an example, it managed to gain an advantage in the compliant cryptocurrency markets of countries like Japan and Argentina, but it was pushed out of markets like the United States, South Korea, and Singapore. If Binance wants to enter the Hong Kong market, it will also have to face competition from local cryptocurrency exchanges like HashKey, securities firms like Tron Securities and Futu Securities, and cryptocurrency exchanges like OKX. This presents a whole new set of challenges for Binance in the era of Richard.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!