Week In Crypto: No End In Sight For Binance Executive Exodus

Three Binance executives and one manager resign in one week, calls grow for regulators to move in on decentralised finance, and the IMF and FSB advise against banning crypto.

A key Binance executive has resigned from his post after a short stay at the company, fuelling speculation of a growing lack of confidence in the leadership of CEO Changpeng Zhao.

On Monday (September 4), former SVP and head of product Mayur Kamat confirmed his resignation, after little more than 18 months in the job.

Speaking to crypto news site The Block, Kamat said he felt it was time to hand over product leadership at Binance to a “next generation” of leaders.

"I have worked closely with product leads to ensure a seamless transition,” he said. “It is also a good time for me personally to take some time off, after 20 years of non-stop product work.”

Kamat added that it has been an “experience of a lifetime” working at Binance and seeing its user base grow.

On his LinkedIn profile, Kamat claims that Binance’s total user base grew from 80m to 150m in the 18 months that he was head of product.

Based on crypto exchange trading volume, such numbers seem hard to believe. Throughout 2021, monthly trading volume across all exchanges averaged about $2trn.

But since January 2022, when Kamat joined Binance, monthly trading volume has dropped precipitously, and is currently at its lowest point since March 2019.

During the writing of this article, Vixio was in contact with a Binance spokesperson, who provided additional information regarding resignations.

However, when Vixio asked for confirmation that the figures quoted by Kamat are correct, the spokesperson did not comment.

Question marks over Binance in Russia

In addition to Kamat, Helen Lai, EVP and head of global fiat, resigned this week, as did Gleb Kostarev, VP and regional head of Eastern Europe, Turkey, Australia and New Zealand (ANZ) and the Commonwealth of Independent States (CIS).

Vladimir Smerkis, general manager of Russia until March 2022, and then general manager of CIS, also announced his resignation this week.

The CIS is a bloc that includes Russia, Belarus and nine other post-Soviet states. It has two offices, one in Minsk and one in Moscow, and its current “cultural capital” is in St Petersburg.

According to their LinkedIn profiles, Kostarev was based in Dubai at the time of his resignation, and Smerkis was based in Moscow.

The resignations come on the heels of a Wall Street Journal (WSJ) report from last month, which claimed that the US Department of Justice (DOJ) is building a Russian sanctions case against Binance.

In the article, the WSJ said that Binance is believed to be handling more than $2bn a month in rouble-to-crypto trading volume, and is also facilitating about $428m per month in peer-to-peer (P2P) transactions.

All of this is allegedly taking place despite the fact that, in April last year, Binance said it would prohibit Russian nationals from accessing its trading services, in line with the EU’s fifth Russian sanctions package.

“As soon as the war started, we stopped working in Russia,” said Binance. “Instead, we implemented sanction requirements.”

The resignations this week follow those of Patrick Hillman, chief strategy officer, Matthew Price, senior director of investigations, and Steven Christie, SVP of compliance.

In July, a Forbes article linked these resignations to Zhao’s handling of regulatory actions against him and the company, but Zhao has denied these reports.

“Some of our team members are growing into bigger roles, some outside of Binance,” he posted on X this week.

“Some are doing new exciting ventures. I even made intros/references for many of them. We are supportive of everyone. We are one community.”

Time to end defi free for all, says IOSCO

A new consultation from the International Organization of Securities Commissions (IOSCO) has called on national authorities to introduce specific legislation to regulate decentralised finance (DeFi) platforms.

In the 128-page consultation, IOSCO offers nine policy recommendations to regulators, including a proposal to “identify responsible persons” behind DeFi platforms.

As noted by IOSCO, this should be a starting point for regulating DeFi platforms in the same way that other financial products and services are regulated.

“A regulator should carefully examine any claim that the arrangement or activity is purportedly decentralised to the point that no persons or entities are responsible,” it said.

“Rather than relying on labels or concepts, such as decentralisation or the automated nature of smart contracts in DeFi arrangements, a regulator should evaluate all the facts and circumstances.”

Using this approach, IOSCO gave several examples of persons who could be identified as responsible for DeFi platforms.

These include founders and developers; holders of voting or governance tokens; holders of admin rights to smart contracts; those with custody over user funds or the ability to reverse transactions; and those who are profiting from user fees.

Once a regulator identifies these responsible persons, IOSCO said the principle of “same activity, same risk, same regulation” should apply.

In DeFi’s case, this would mean requirements to identify platform risks and conflicts of interests, and requirements to provide disclosures on investor protections.

The consultation is open until October 19, 2023.

Regulate but don’t ban crypto, says IMF, FSB

Similar to the IOSCO consultation, this week the International Monetary Fund (IMF) and Financial Stability Board (FSB) published a new report on policy recommendations for regulating crypto-assets.

As with IOSCO and DeFi, both the IMF and FSB would like to see increased coordination between jurisdictions on crypto-asset regulation.

Among their recommendations, the IMF and FSB advised national authorities against banning crypto-asset activities.

“Blanket bans that make all crypto-asset activities (e.g., trading and mining) illegal can be costly and technically demanding to enforce,” they said.

“They also tend to increase the incentives for circumvention due to the inherent borderless nature of crypto- assets, resulting in potentially heightened financial integrity risks.”

The report concludes that a decision to ban is not an “easy option”, although it might seem like one on the surface.

Instead, “targeted restrictions” to “manage specific risks” might be appropriate, particularly in cases where national authorities are “resource-constrained”. 

As examples of where this approach has been successful, the report referred to restrictions on privacy tokens implemented globally, and restrictions on crypto-asset promotions in the UK, Spain and Singapore.