Binance came out of nowhere in 2017 to become the world\u2019s biggest cryptocurrency exchange. Its explosive growth has been fueled by a strategy of avoiding the regulatory headaches that go with the conventional banking system, and focusing instead on the freewheeling world of crypto-to-crypto trading.<\/p>\n
Now, Binance is wading into the world of government-issued money\u2014raising the question of whether it can keep growing without getting singed by regulators. The latest sign of Binance\u2019s new focus came last week when the company announced it would hire CipherTrace<\/a>, a California-based business that helps companies and law enforcement trace suspicious cryptocurrency movements.<\/p>\n \u201cThis is inline with our aggressive expansion plan. We want to keep standards of anti-money laundering and compliance at a high level,\u201d Samuel Lim, chief compliance officer at Binance, told Fortune<\/em>.<\/p>\n While Binance is confident that all of these activities are legal, others are not so sure.\u00a0David Silver<\/strong><\/a>, a Florida-based attorney who has brought class action lawsuits against numerous cryptocurrency companies, believes Binance has been playing with fire.<\/strong><\/p>\n \u201cThe crypto-to-crypto aspect helps hide what they\u2019re doing and makes it harder for regulators to catch them. They\u2019re going to need to legitimize because the world isn\u2019t going to let them move massive amounts of money through countries in which they\u2019re not regulated but have active users. That will eventually come to bite them in the ass,\u201d said Silver.<\/strong><\/p>\n For its part, Binance says it is has been careful to follow the law in every jurisdiction, including in the United States where regulators have targeted<\/a>numerous crypto projects as illegal securities offerings. According to Lim, the company is not facing any legal trouble.<\/p>\n Lim, whose background includes stints at global banks like Deutsche Bank and Barclays, added that Binance has already been working with other compliance firms, and that the company has long taken seriously issues like fraud and money laundering.<\/p>\n These efforts are likely to receive new scrutiny in coming months as Binance prepares to launch a so-called \u201cfiat to crypto\u201d gateway\u2014allowing customers to trade traditional currencies for digital ones like Bitcoin\u2014in Singapore<\/a>, which will put it squarely in the grips of that country\u2019s financial regulators.<\/p>\n Meanwhile, the company has also been promoting a new type of crypto fundraising known as \u201cInitial exchange offerings.\u201d These are a variation of initial coin offerings, which involve selling digital tokens to the general public, and were once wildly popular but fell out of favor amid regulatory disapproval. (The \u201cexchange\u201d variation involves Binance selecting a handful of token projects to conduct sales on the company\u2019s \u201cLaunchpad\u201d platform).<\/p>\n \u201cWe are not under any sort of investigation. But we work closely with law enforcement and governments worldwide. They write to us all the time,\u201d he said.<\/p>\n According to Lim, Binance is navigating the same sort of regulatory challenges as other fast-growing companies did before them.<\/p>\n \u201cThe message I hope you can put out is exchanges are trying their best,\u201d he said. \u201cIt\u2019s not something that happens overnight. Apple<\/a> and PayPal did not get to where they are on day one. We\u2019ve only been around two years but the investments we\u2019ve made in compliance shows the seriousness we have to win the trust of financial institutions.\u201d<\/p>\n \u201cWe are not under any sort of investigation. But we work closely with law enforcement and governments worldwide. They write to us all the time,\u201d he said.<\/p>\n More broadly, the regulatory question could become pivotal as Binance looks to consolidate its global marketshare. As trade publication Coindesk described in an effusive profile this month, Binance\u2019s swift moving strategy helped it take the crown from the cryptocurrency exchange front runner, which pursued a compliance-focused strategy, but was slow to add assets and move into new markets.<\/p>\n Now, the competition between the two companies\u2014whose relations Binance CEO Changpeng Zhao described to Fortune<\/a> last year as very positive\u2014is set to heat up as the San Francisco-based cryptocurrency excahnge scrambles to catch up overseas, and as Binance becomes more mindful of compliance.<\/p>\n According to Lim, Binance is navigating the same sort of regulatory challenges as other fast-growing companies did before them.<\/p>\n \u201cThe message I hope you can put out is exchanges are trying their best,\u201d he said. \u201cIt\u2019s not something that happens overnight. Apple<\/a> and PayPal did not get to where they are on day one. We\u2019ve only been around two years but the investments we\u2019ve made in compliance shows the seriousness we have to win the trust of financial institutions.\u201d<\/p>\n Read the Full Article:<\/p>\n