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The crypto platform that until recently has been known for its catch-me-if-you-can approach has announced that it has received a green light to operate in Bahrain and Canada.
Binance has built its business model on the concept of decentralisation since its inception. A crypto exchange with no headquarters, Binance has repeatedly moved its offices to avoid facing regulatory actions.
However, last year, the exchange realised that it has grown too big and can no longer escape regulatory oversight. Therefore, in November, founder Changpeng Zhao took a U-turn and announced plans to engage with regulators and establish a centralised headquarters.
Since then, Binance has been doubling down on its efforts to establish itself as a regulated centralised entity.
The platform was originally seeking a payment services licence in Singapore but decided to withdraw its application in mid-December, according to the South China Morning Post.
Its operations in the Asian country will end on February 13.
Meanwhile, Canada’s money service business registry shows that, on December 24, Binance received a nod from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
The licence allows the company to engage in foreign exchange dealing, money transferring and dealing in virtual currencies.
Three days later, on December 27, Binance announced that it received “in-principle approval” from the Central Bank of Bahrain (CBB) to establish itself as a crypto-asset service provider in the country.
The approval makes Bahrain the first country in Middle East, North Africa (MENA) to authorise the crypto platform’s operations in the region, even if it is only an “in-principle approval” at the moment, which means Binance has yet to complete the full application process in due course.
According to the company, these actions form part of the crypto firm’s plans to become a “fully-regulated centralised cryptocurrency exchange”.
At the same time, Binance is also collaborating with the Dubai World Trade Centre Authority (DWTCA) in an effort to develop “progressive” virtual asset regulations.
Zhao has previously named Dubai and France among locations with a crypto-friendly regulatory approach, but was reportedly also considering a UK licence.
Original story: Binance Changes Catch-Me-If-You-Can Approach Amid International Claim
Victims of the Binance account freeze are facing new challenges to gain redress as the crypto exchange has no headquarters. Meanwhile, the crypto trading platform has realised it has grown too big to avoid the sight of regulators and is seeking a payments license.
More than 2,300 individuals have joined a claim against Binance following an outage in May, which caused accounts of hundreds of traders to be frozen for multiple hours.
The outage took place on May 19, the day after the Chinese Banking Association told the country's financial institutions to stop providing cryptocurrency services, causing one of the largest percentage drops in the value of Bitcoin. The outage, which also affected other trading platforms, allegedly caused huge losses for traders.
Liti Capital, a Switzerland-based private equity firm, has stepped up to finance a claim arising from the account freeze that they believe affected thousands of traders and resulted in more than $100m of damages.
How do you deal with a company with no HQ?
The decentralised nature of crypto currencies and blockchain is thought to be one of the most appealing features of the product, meaning that no single authority has ultimate control of the system. This decentralisation is also partly rooted in the Binance business model.
Binance has been able to grow without establishing an official headquarter in any one country, continuously moving its offices to avoid stricter regulatory frameworks.
The exchange was founded by CEO Changpeng Zhao in 2017, most likely in China. Soon afterward, it moved its servers to Japan, and then to Malta, after the Asian countries hinted at introducing stricter crypto regulations.
The platform currently has office locations across 38 countries, including the Cayman Islands, Singapore, the US and the UK. However, there is no clear indication as to which of the entities are parent companies and subsidiaries.
The case raises the important questions of how to interact with a company that stays outside the scope of regulation and has no offices or headquarters and how do you hold them accountable, David Kay, executive chairman of Liti Capital, told CNBC when the news broke.
“If [Binance] can’t be regulated, and there is no place for customers to seek recompense, I think what you’re going to see is that regulators have to step in.”
There are also more technical legal hurdles in the case. For instance, Binance’s current terms of use include a waiver of class arbitrations. However, it is unclear whether the platform added this provision before or after the current dispute started.
In addition, the exchange requires disputes to be solved through arbitration in Hong Kong, which makes it difficult for traders to go after the company as the estimated cost of having a single case heard is $65,000.
This is a landmark case, Kay said, explaining that not only is it an international arbitration dealing with the issue of a "stateless company" but it is also the largest consumer group arbitration in history.
In the event of successful litigation, Liti Capital will be entitled to 30 percent of the amount collected from the crypto platform.
Switch from catch-me-if-you-can approach
Binance has grown to become the world’s largest digital currency exchange in terms of trading volume, and in the process, the company has received a number of regulatory warnings worldwide, including from Hong Kong, Japan, and the UK, and is reportedly subject to a US federal inquiry.
In a September blog post, the company said “we recognize what it means to be the industry leader versus simply being the largest player in the industry. We recognize the myriad responsibilities that are inherent in the former.”
Later that month, Zhao told the South China Morning Post that as cryptocurrencies’ market cap has grown too big for regulators to ignore, his company will work to become a licensed financial institution with centralised headquarters.
“As the largest player in the industry, we need to prepare ourselves for the shift. We are making changes to make it easier to work with regulators,” said Zhao.
The company is now seeking a payment services license in Singapore and suspended its products in the Asian country in late October to comply with a regulatory warning.
“The move is part of our work with the Monetary Authority of Singapore (MAS) to update our platform in compliance with local regulations,” Binance said in a notice.
