“On the 42nd day after Binance launched its product, its trading volume ranked 10th in the world; on the 92nd day, it ranked 5th in the world; on the 156th day, it ranked 3rd in the world; on the 165th day, it ranked 1st in the world, and it remains so until now.”
At the end of 2022, Binance CEO Changpeng Zhao (CZ) became the uncrowned king of the cryptocurrency field. The sudden collapse of its competitor FTX doubled Binance's market share. However, with success comes increasing regulatory pressure.
1. "The battle for market dominance"
Sam Bankman-Fried (SBF), co-founder of FTX, Binance’s biggest competitor, approached CZ in November last year, hoping that the Binance CEO could rescue his exchange. CZ refused, which almost determined the fate of FTX.
On November 10, the day before crypto empire FTX filed for bankruptcy, SBF tweeted a message to his competitor: “Well done, you win.”
The collapse of FTX has made Binance the undisputed "boss" in the cryptocurrency world, controlling more than half of the rapidly growing cryptocurrency market by the end of 2022.
If Binance can weather the regulatory shock following the FTX debacle, it will become the go-to place for crypto token trading, and CZ can establish himself as the “acceptable face” of cryptocurrency, even though many still view the market as the Wild West.
“Many people saw SBF as the leader of the industry and saving the industry from regulators,” said Charley Cooper, former chief of staff of the Commodity Futures Trading Commission (CFTC). “When FTX collapsed, everyone saw CZ as a potential savior of the industry’s future.”
Yet while major cryptocurrencies like Bitcoin have stabilized in the wake of FTX’s collapse, Binance has struggled. Its sheer size has made it a target for regulators and lawmakers who want to ensure that broader financial markets are never exposed to “too big to fail” cryptocurrency exchanges.
2. "Regulatory storm is coming"
Binance has faced a huge regulatory challenge after the collapse of FTX. US financial regulators have filed a series of charges against Binance, including illegally serving US customers and improperly controlling customer assets.
Other players in the crypto industry, such as representatives from the DeFi project Phuture, have also expressed concerns about Binance’s huge size, arguing that it runs counter to the industry’s original intention of decentralization.
3. “Growth at all costs”
Since its establishment in 2017, CZ has encouraged its employees to work hard to expand market share. This culture of rapid expansion has attracted a large number of employees, but it has also brought about high-pressure internal management.
In addition, Binance has a group of loyal followers known as "Binance Angels". These "volunteers" provide a lot of support to Binance's community and business.
4. Confidentiality and Security
As Binance has grown rapidly, the company has also strengthened its internal security and confidentiality requirements. Instructions in the onboarding documents to turn off geo-tracking and avoid disclosing personal information show Binance’s emphasis on security.
5. "Regulatory 'encirclement and interception'"
Binance, a cryptocurrency exchange, has grown rapidly since its inception by seizing the uncertainty of cryptocurrency regulation. Zhao Changpeng (founder of Binance) described himself as a "freedom man" at a conference in Shanghai, and he did not like "too many rules", which also enabled Binance to quickly stand out in the cryptocurrency field.
But he also admitted that he did not fully agree with the interpretations of various countries on the nature of cryptocurrency, even if some of them involved legal issues.
But as its business expanded, Binance gradually became the focus of regulators.
Initially, Beijing dealt a heavy blow to Binance over its initial coin offering.
Binance subsequently shifted its operations to Japan, but encountered regulatory issues and even warned employees not to use company email addresses to communicate with external entities in Japan.
Soon after, Thailand also filed charges, alleging that Binance was operating a digital asset business without a license.
In 2021, financial regulators in the UK and Singapore took action against Binance.
The Netherlands also fined it for related reasons.
As time goes by, Binance continues to have friction with major financial regulators around the world. In 2022, France allowed Binance's subsidiary to become a digital asset service provider, which seemed to be good news. But then there was news that the French police were investigating Binance's local business.
In early 2023, Binance planned to acquire crypto lending company Voyager for $1 billion, but was opposed by the U.S. Securities and Exchange Commission. Then, the New York Department of Financial Services intervened in the issuance of Binance's branded crypto token BUSD. Later, the Commodity Futures Trading Commission sued Binance, arguing that it had illegally contacted U.S. customers. This incident further exacerbated the conflict between Binance and U.S. regulators.
Binance also seems to be in turmoil. Former employees said that although the company emphasizes community culture on the surface, the reality is not the case. Some employees said when they left that they did not get the respect they deserved.
Recently, Binance plans to lay off about 8,000 employees. Although the exchange said the move was not due to the company's size, people familiar with the matter believe that market pressure forced Binance to make this adjustment.
Overall, Binance’s current predicament reflects the turmoil in the entire crypto industry.
Conclusion
Binance and compliance is a very controversial topic. In most countries, Binance is non-compliant.
Especially the dispute between Binance and the SEC. Although Binance has been sued by the SEC, most observers believe that this is just a prelude to a more intense struggle, and the real big struggle should be yet to come. Moreover, Binance's efforts to pursue compliance can basically string together the entire company history of Binance, which is worth describing in detail later.
Binance is like a map full of fog of war, and because of this, Binance is destined to become one of the most important companies of this era.
✏️Disclaimer: This article is for reference only, DYOR.
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