CZ FAQ 5 - Why Binance Embraces Regulations
This article is a part of the “CZ’s FAQs” series. Opinions expressed here are personal opinions and do not represent Binance’s official position. It is not financial advice. And could be totally wrong.
There are many misconceptions out there. I will first dispel a few.
“Regulation is bad for crypto.” Please don’t hold such a simplistic view. The real world is a gradient scale on multiple vectors, but it is still very simple. Good regulations will be good for crypto. Bad regulations will be bad for crypto. Having good regulations that protect consumers while encouraging innovation is important for growth of the industry.
“You grow big by being crazy, wild west, or unregulated.” Nothing can be further from the truth. When you are about to deposit your hard earned money with an exchange, the last thing you want is a crazy platform, right? What do you do? You research and find an exchange that other people (and yourself) can trust. Being trusted by users is the best and only way to grow. In most places in the world, being a regulated platform increases that trust for everyone.
There are many reasons that we at Binance want regulations. Let me go through them:
Mass Adoption
Today, I’d estimate crypto adoption to be about 5% globally. This means we are still in the early adopter phase of crypto. These early adopters are OK with depositing money with an offshore exchange they trust. But for the remaining 95% of people - the mass adopters - they would typically prefer using an onshore, licensed exchange, with a local office and/or presence. Therefore, having a license allows us to attract the 95% at a faster pace.
Better Integration with Banks
I know some die-hard crypto OGs will hate what I am about to say next. These crypto OGs hate anything that is slightly centralized. They want to only live in the fully decentralized crypto utopian island. But the fact is, that’s a very small island. Today, 99.9% of money is still in fiat. And, the 5% of people who have crypto typically only have a small portion of their wealth in crypto. For the crypto industry to grow, we need fiat on and off-ramps. We need to build bridges between crypto and fiat. For this, we need to integrate with traditional financial systems, banks, payment services, etc. And for that, we need licenses.
There are a few more reasons.
Today, given our market presence, most regulators who are willing to talk to industry players typically talk to us first. Compared to other industry peers, our voice is usually heard first, and our opinions are usually taken with a heavier weight. In this way, we can influence regulations to the best extent we can for the good of the industry. We love to share our best practices that make users trust us, from the fundamentals of KYC/AML, to industry specifics such as security, wallet management, listing frameworks, customer support, dispute resolution, to even internal employee policies. We hope by sharing our best practices, we can help to build a more healthy industry.
Lastly, in a regulated market, typically only a few large players remain. We welcome more exchanges in the space, but we sometimes get frustrated when small exchanges employ tactics that hurt users. We want to see those stopped.
There are some challenges to regulation. Most regulations mean some level of restrictions, which can limit access for some users, for example. Over-regulation or poorly designed regulation will kill the industry in the local market, and hence make the local market miss out on the next FinTech evolution. But good regulation that has been carefully designed and tailored will allow the industry to grow faster, not slower.
For all the reasons above, and many more, Binance welcomes regulations in the industry and has always worked collaboratively with regulators all over the world.
Lastly, today most regulators are still only looking at a small section of the crypto market, the centralized exchanges. We hope by working closely with regulators, we can help to bring regulations that protects consumers and attracts innovation.