A Year of Compliance and Transparency
In 2022, we ramped up our regulatory compliance and user protection initiatives.
By working collaboratively with regulators worldwide, Binance has secured registrations and licenses in 14 jurisdictions as of the end of 2022.
To further reinforce our commitment to fight against bad actors in the space, we’ve increased our security and compliance headcount by over 500% and became the first crypto exchange to join the National Cyber-Forensics and Training Alliance (NCFTA).
We launched a proof-of-reserves (PoR) system to enable anyone to verify that user funds custodied on Binance are held 1:1, plus extra reserves.
2022 is coming to an end – a year that saw Binance ramp up our global compliance, transparency, and user protection initiatives. Let’s look back at how we upped our game in these key domains.
2022 has been a whirlwind year for the digital asset industry, filled with ups and downs. In July, Binance celebrated its fifth anniversary. When we first started, we embraced a straightforward yet monumental mission: to advance the freedom of money for people around the world. From the beginning, our approach was to always put our users first and act in their best interest. This user-focused stance resonated with a diverse audience around the world, allowing us to build one of the largest and most passionate crypto communities in the industry.
While much has changed since we started our journey, our goals have remained unchanged. We want to extend the freedom of money to more people around the world, and widespread adoption can only be achieved through building a safe, transparent, and trusted ecosystem. To achieve this, we must proactively follow best practices that help establish trust between us and our users. These best practices include implementing robust security measures and identity verification systems, helping law enforcement agencies in their fight against financial crime, being transparent and responsive, and following the existing rules while being instrumental in the developments of new, crypto-specific policies and regulations.
In other words, the importance of regulatory compliance for our industry is immense. Some die-hard early cryptocurrency adopters might argue that pushing for increased compliance goes against the core ethos of the space — decentralization. However, we firmly believe that working alongside governments and actively engaging in regulatory processes is a necessary prerequisite of mass adoption that ultimately benefits all users and organizations in our ecosystem.
As Changpeng Zhao (CZ), the founder and CEO of Binance, once stated:
“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 the growth of the industry.”
Over the past year, as digital assets remained high up on regulators, policymakers, and the public’s agendas, we’ve taken active steps to make sure we remain on top of the rapidly evolving regulatory landscape. We’d like to take this opportunity to share a few of our major highlights.
Global Licenses and Registrations Obtained
Over the years, Binance has worked collaboratively with policymakers to help shape thoughtful regulations that foster user protection and innovation within our industry. Recognizing the value of operating in a stable regulatory landscape, Binance has dedicated considerable time to applying for licenses, registrations, and authorizations in various jurisdictions across the world.
While this isn’t an easy path, this year we’ve made massive strides in securing licenses and registrations globally. As of the end of 2022, Binance has secured 14 registrations and licenses, obtaining regulatory approvals or authorizations to operate in Colombia, Abu Dhabi, Bahrain, Dubai, South Africa, France, Italy, Spain, Poland, Lithuania, Cyprus, Kazakhstan, Australia, and New Zealand. Many of these advances were finalized throughout 2022.
As we continue to expand into different regions, we’ll keep working in tandem with national and international regulators and policymakers to ensure we provide our services in strict compliance with applicable laws and regulations.
Collaboration With Law Enforcement
We are convinced that ensuring our users’ maximum safety is impossible without coordinating and cooperating with law enforcement. Contrary to the still-widespread belief that the crypto ecosystem is a safe haven for cybercriminals, on-chain data analysis shows that, in 2021, only 0.15% of cryptocurrency transactions were associated with some type of illicit activity – with the share of fiat money used for illicit purposes being greater by orders of magnitude.
Fundamentally, digital assets offer much greater transparency and traceability compared to fiat, which can become a powerful tool in the hands of crime fighters. We readily take action to prevent bad actors from using our platform, which includes working closely with law enforcement to identify, trace, and take down criminal actors.
To strengthen our capacity to fight against cybercrime, we’ve increased our security and compliance team by over 500%, and became the first crypto platform to join the National Cyber-Forensics and Training Alliance (NCFTA), an organization focused on identifying, mitigating, and neutralizing cybercrime threats.
The Binance investigations team has also led and participated in 71 workshops on countering financial crime and educating law enforcement officers and government officials in Argentina, Brazil, Canada, France, Germany, and South Korea, among others. Finally, as of December 2022, our star investigations unit has responded to more than 47,445 law enforcement requests with an unprecedented average turnaround of just three days.
User Security and Transparency
At the beginning of this year, we topped up the Secure Asset Fund for Users (SAFU), and it was valued at US$1 Billion on January 29, 2022. SAFU is an emergency insurance fund composed of BNB, BUSD, and BTC holdings that is designed to protect users who incur losses due to unforeseen circumstances. When Binance established the fund in July 2018, we committed 10% of all trading fees to safeguard our users in case of potential security breaches.
Finally, in light of some high-profile bankruptcies and liquidity crises that shook the industry this year, it’s now clearer than ever that transparency is the only way for centralized cryptocurrency platforms to maintain user trust. Our commitment to our users remains the same as it has always been. That’s why we launched our proof-of-reserves (PoR) system that lets users verify that we hold the necessary funds to back their assets at a 1:1 ratio, plus extra reserves. Our reserves increase by at least one BTC each time a user deposits one BTC to our platform, and users can verify their BTC assets on Binance via our PoR system that utilizes a Merkle tree technique. A Merkle tree is a cryptographic tool that consolidates large amounts of data and makes it easier to process. On top of building and implementing a PoR system as part of our commitment to transparency, we’ve also disclosed details of our hot and cold wallet addresses so that anyone can verify our holdings in real time.
The Year Ahead
Strong regulatory compliance and an unwavering commitment to our users' protection is a core principle of Binance’s culture. We believe that the long-term success and integrity of the industry depends on it. Most importantly, by working proactively with regulators and law enforcement, we can ensure that user security is maximized throughout the Binance ecosystem. As we ring in the new year and reflect on what Binance and our wonderful community has accomplished in 2022, we look forward to further contribute to the development of sensible regulatory frameworks around digital assets in 2023.
Want to learn more about our compliance and user protection initiatives? Check out the following articles: