Changpeng ‘CZ’ Zhao, CEO of beleaguered crypto exchange Binance, has described clear regulations as critical for growth of the virtual asset industry in an open letter this week.
Previously, UK, Japanese and Cayman regulators released statements in short succession asserting that the company was not licensed to operate a crypto-currency exchange in their respective jurisdictions.
Regulators appear to be caught in a game of ‘whack-a-mole’ with Binance, which has a holding company incorporated in the Cayman Islands and entities around the world, but no clearly designated operational headquarters.
The Cayman Islands Monetary Authority said it is investigating whether the company is carrying out activities that would fall under its regulatory oversight.
A spokesperson for the company told digital asset news site The Block that Binance.com had always operated in a decentralised manner. “We do however, have entities incorporated under the laws of the Cayman Islands performing activities that are permitted by law and not related to operating crypto exchange trading activities.”
In a blog post on the company’s website, Zhao wrote that four years after the company was founded, there is a need for clearer regulatory frameworks in different countries, given the wider adoption of crypto assets by first-time users.
“More regulations are, in fact, positive signs that an industry is maturing, because this sets the foundation for a broader population to feel safe to participate in crypto,” he noted.
“I believe a well-developed legal and regulatory framework in the long term will be a solid foundation that truly makes crypto essential in everyone’s daily life.”
The Binance CEO said that, even in the absence of regulation when the industry was in its infancy, the company had always sought to protect its users and credited this as one of the reasons for the crypto platform’s rapid growth.
Zhao outlined the company’s cooperation with law enforcement and regulators, stating that this year Binance had already assisted 5,600 investigation requests – twice the rate of 2020.
Likening the emerging crypto sphere to the early development of the automobile, he said, “When the car was first invented, there weren’t any traffic laws, traffic lights or even safety belts.”
Describing “compliance as a journey” he added that laws and guidelines were developed as cars were already running on the road.
Zhao said, “Clarifying and building the first set of standards is critical for the industry’s continued growth. And Binance wants to be a positive contributor.”
According to the CEO, Binance has grown its compliance team five-fold since last year and is planning to double its size by the end of 2021.