Binance’s explosive growth led to compliance failures
“As part of the settlement, CZ will not be able to participate in the day-to-day operations of the company,” explained Richard Teng.
Still, Binance's CEO downplays the image of someone who is rejoicing in the challenges ahead. Speaking to Cointelegraph two weeks after taking over from outgoing CEO Changpeng ‘CZ' Zhao, Teng seemed delighted to be at the helm of the world's largest cryptocurrency exchange.
Working closely with international regulators, I am taking the baton and driving our growth agenda forward.
Teng believes the “hypocrisy” that has plagued Binance in recent months is on the rise following its surprise $4.3 billion settlement with the US Department of Justice for violating US regulations and sanctions programs.
$4.3B due to gaps in payment compliance
The exchange has paid a heavy price for mistakes made during its meteoric growth since 2017. Teng Zhao recalls how a team of 6 people built Binance into a global operation with thousands of employees serving an estimated user base of over 166 million.
“In those very early days when he was building the company, there were gaps in terms of compliance. That led to all these violations and mistakes, but those are historical issues,” says Teng.
Weaknesses in the early compliance regime led to the largest crypto-related settlement in US history. However, Teng assures the company that the user's money, safety and security will always remain “sacred”.
“US agencies have investigated our operations in detail to reach this settlement, and there are no allegations of misappropriation of user funds,” he added.
Binance obligations to US authorities
Binance is now left to cover the ongoing costs and investigation involved in the settlement with US authorities. This will involve five years of monitoring and significant compliance work to ensure “the complete removal of bins from the United States.”
Teng could not go into detail about Binance.US' ongoing legal battle with the US Securities and Exchange Commission (SEC) over securities violations. Still, the company expects to meet the requirements set forth in the SEC and the requirements set forth in the case.
Binance's CEO must abide by non-disclosure agreements related to the $4.3 billion payment and will not comment on the payment method of the fine. Cointelegraph understands that Binance is in the process of paying the assessment, while a separate case on CZ will be paid personally by the former CEO.
In the year The company confirmed that the $3.9 billion USD token transaction reported on November 21 was “not related to settlement matters” with the US Department of Justice.
Was Binance Unfair?
Prominent figures in the cryptocurrency space, including former BitMEX CEO Arthur Hayes and Galaxy Digital's Mike Novogratz, have commented on the differences between Binance and major financial institutions in recent years.
Teng countered the perception that “Wall Street banks” were not treated the same, despite their big mistakes.
“In terms of the financial sector, fines are not uncommon. If you Google the list of fines paid by financial institutions, that list is close to $90 billion in fines,” says Teng.
Whether or not Binance is an example should not be considered. However, the exchange may be “the most regulated exchange globally”, Binance operates in 18 different states.
Binance is now focused on compliance. The company grabbed headlines for hunting down strategic individuals to navigate regulatory requirements in various jurisdictions.
Teng said the company has “invested heavily” in this regard, pointing to key capabilities in its compliance team at regulatory agencies such as the SEC and traditional financial institutions, including the likes of Morgan Stanley and Barclays.
Building from UAE, France
Binance has been a global operation, but the company has set up two regional headquarters. The United Arab Emirates (UAE) serves as the headquarters for operations in the MENA region, while France is the European base.
The region is familiar to Teng, who previously lived in the UAE for nine years and served as CEO of local regulator Abu Dhabi Global Markets. His role includes developing a cryptographic framework for the local ecosystem.
“When I first came across crypto, my impression was that it was the future of finance. But for this to really gain traction and mass adoption, you need two components,” explains Teng.
Clarity of laws and regulations is the first consideration and the second is to increase institutional adoption. The latter point is crucial for Teng investors and because it brings liquidity and drives research.
As a result, the United Arab Emirates has emerged as a symbolic oasis for the cryptocurrency and blockchain sector. It continues to attract international players as a base of operations in the MENA region.
The implementation of European markets in Crypto-Assets regulations makes the prospects for Binance good in the region.
“You have the clarity of regulations to operate in 27 different regions,” says Teng, which provides a complete set of requirements for industries that have suffered from “differences in regulations” to date.
Binance was forced to discontinue its services in the Netherlands in June 2023 after failing to meet the registration requirements for a Local Virtual Asset Service Provider (VASP) license. MCA can be used as a means to expand into new markets by 2024 and beyond.
Going to CZ shoes
Undoubtedly, stepping into CZ shoes is an unavoidable task. Teng describes the founder of Binance as an inspirational leader and great mentor focused on performance.
Incumbent is honest in understanding that he cannot replace CZ as founder-CEO, but the current landscape lends itself to fresh faces and new approaches.
“What I can do is bring my own values and expertise to the table in a mature company. Six years ago, compared to now, Binance is completely different,” Teng explained. The new CEO will report to the board of directors, which will act as the company's governing body. It serves.
If and when he has time to blow off some steam, Teng hopes to maintain a routine in his personal life. The CEO enjoys working out, doing a mix of “weights, cardio and core.” Elon Musk's biography by Walter Isaacson is a bookworm, referring to his recent reading.
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