Did you ever imagine Changpeng Zhao, the CEO of Binance, talking about regulating the crypto sector? Believe it or not, something like this has happened in the last few hours. Is that, after the FTX debacle, the executive director of the main cryptocurrency exchange platform worldwide spoke about the need to create “a global standard” that serves to make the operation of the companies in the ecosystem transparent.
Certainly, what CZ mentions should not be taken as a loud request for certain regulatory bodies – be they from the United States, Europe, Asia, or wherever – to get their hands on the world of cryptocurrencies. Although it can be understood as a wink or a show of goodwill. Whether it is sincere or out of necessity is another discussion. In addition, he installs Binance as the new singing voice in the quest to impose a kind of “good practices manual” among the most important players in the sector.
During your participation at the B20 conference, in Indonesia, Zhao referred to the matter, in statements very marked by what has happened in recent days. “As an industry, we need to increase transparency. We need to work very closely with regulators around the world to make this industry more robust,” said the Chinese-Canadian businessman.
In addition, he took the opportunity to throw darts at Sam Bankman Fried, the former CEO of FTX. “To be very frank, nobody can protect a bad player. If a person is very good at lying and pretending to be something they are not, or if someone wants to live above the law, the law is not going to stop it. But it can help reduce it. As gamers we should be more vocal about it and set stronger standards for the industry,” the Binance leader said.
Binance proposes stronger standards for the crypto world
Talking about regulation in the world of cryptocurrencies is basically blasphemous. It is that both Bitcoin and many of the digital assets that followed it were born under the premise of cutting ties with the traditional financial system and fiduciary money. And although the concept remains valid in a very important sector that pushes for the use of decentralized tools and instruments, it is a reality that the most important growth within the ecosystem has occurred through centralized platforms. That is, through companies like Binance, Coinbase and the fall from grace FTX, among many others.
That CZ has come out to talk about regulation and stronger standards for the cryptocurrency industry throws up a couple of readings. On the one hand, the most logical: all centralized platforms they want to show that they are not FTX. In fact, following the fiasco of the Sam Bankman-Fried firm, many companies in the sector —with Binance in the lead— came out to show their proof of reserves; that is, its proof of reserves. Thus, they published balances of their cryptocurrency accounts and portfolios to reassure customers that they do not suffer from liquidity problems.
Centralized platforms, on the other hand, know that the FTX episode will lead to fierce regulatory scrutiny, and that the best way to weather it is by being cooperative. Zhao himself expressed it to his employees in a memo that was known in recent days. “The fall of FTX is not good for anyone in the industry. Don’t see it as ‘a win for us’. User confidence has been severely affected. Regulators will scrutinize even more exchanges. It will be more difficult to obtain licenses [para operar] anywhere in the world. And people now think we are the biggest and will attack us more,” he remarked.
More regulation in sight?
However, the renewed push by the CEO of Binance to —to a greater or lesser extent— embrace regulation is still striking. It is that the operation of its platform has been under the magnifying glass on more than one occasion. Especially, due to the few or no controls on the origin of the funds of its users, and for withholding information before the regulatory entities. In June, an investigation by Reuters revealed that the exchange had served as safe conduct to launder at least $2.35 billion in illicit funds.
To be clear, Binance and Changpeng Zhao are not the first big names in the crypto world to talk about regulation. Coinbase and even Sam Bankman-Fried himself have also done it in the past, under the argument of seeking “clear rules” for the sector. And the fall of FTX is now the perfect excuse for organizations from around the world to go against these companies and their businesses.
We’ll see how this situation progresses. For now, Binance put on the savior of the crypto world and announced a recovery fund for projects with liquidity problems. Is it a show of good faith specially designed to please regulators? The timing of the decision does not seem accidental, and hardly it is.