The major cryptocurrency exchange Binance took a favorable approach to business compliance after years of being in the cat and mouse game with regulators around the world, and it worked surprisingly well in terms of user retention, according to a new interview with Binance CEO Changpeng Zhao.
Speaking to Bloomberg News, Zhao pointed out that Binance made the KYC (Know Your Customer) or Know Your Customer processes mandatory “for all users globally, for each role” in an attempt to attract new users as a company that is compliant with regulations. It revealed that Binance lost around 3% of users after making KYC mandatory.
Binance did not immediately respond to Cointelegraph’s request for confirmation.
KYC is a common practice used by cryptocurrency exchanges and traditional financial institutions. It allows companies to verify the authenticity of a user by requesting some form of real-world identification. Binance made KYC mandatory for all of its new and existing users on August 20, to access its products and services, such as cryptocurrency deposits, transactions, and withdrawals.
“We believe that compliance will allow more users to use our services”, Zhao said, adding that most people are more comfortable using a licensed exchange.
Binance touted its decentralized, non-physical headquarters structure for years until Zhao announced in July that the exchange was ready to work with local regulators saying: “We want to have a license everywhere. From now on, we will be a financial institution ”.
In his interview, Zhao said that while regulators were initially skeptical of Binance, their attitudes have changed as communications continue. “When people see me in person, they say, ‘Look, CZ is very reasonable, very calm, he’s not a crazy guy.’ That helps establish their trust much faster ”, added.
Binance recently established three subsidiaries in Ireland as part of Zhao’s vision to establish formal headquarters in different regions of the world. “When we started, we wanted to adopt the decentralized principles, no headquarters, work around the world, no borders”, Zhao said, adding: “It is now very clear that to run a centralized exchange, you need a centralized legal structure behind it.”
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