How Binance became the world’s biggest crypto exchange without headquarters or licenses
Binance started its journey as a crypto exchange in 2017 and today it is the biggest player in the $2.6 trillion crypto industry.
Binance has 3,000 employees across the world, according to its founder and Chief Executive, Changpeng Zhao.
Binance 20% spot trading fee kickback
Nov 12, 2021,
Updated Nov 12, 2021, 2:47 PM IST
Ever since the boom of Bitcoin and related cryptos, these digital assets seem to have become the first choice for every investor.
A cryptocurrency exchange plays a crucial role in evaluating the whole crypto ecosystem and one name that comes on top of the list is Binance.
The inventive decisions taken by the crypto exchange have made it the world’s fastest-growing major financial exchange, and that when it has no head office or formal address, lacks licenses in the countries where it operates and has a CEO who not so long ago wouldn ‘t respond to questions about his location.
Binance started its journey as a crypto exchange in 2017 and today it is the biggest player in the $2.6 trillion crypto industry. The exchange giant’s ecosystem comprises multiple crypto exchanges, numerous cryptocurrencies the Trust Wallet and its TWT token, a Token launchpad and more.
Also Read: Binance Smart Chain rolls out $1 bn fund to fast-track blockchain tech adoption
Binance processes more trades for cryptos of the likes of Bitcoin and Ethereum each day, $76 billion worth, than its four biggest rivals put together, as per data provider CryptoCompare, The Wall Street Journal reported.
Is it the end yet?
The years of predominantly unrestrained, unregulated growth for Binance particularly and the cryptocurrency industry largely are coming to an end.
The crypto exchange is facing legal troubles across the globe in countries such as Italy, Japan, Canada, Cayman Islands, Thailand, Malaysia, the UK, the USA, South Africa, and Singapore.
Not just financial regulators but many investors are also likely to partake in proceedings against Binance, claiming damages for the money they lost during a major outage.
Since the crypto exchange has no official headquarters, many investors are finding it difficult to decipher how and where to take it to the court.
Although Binance is paramount to the crypto ecosystem, its legal troubles could have an immense negative impact on cryptocurrency prices.
Financial regulators, specifically, have been increasingly worrying that digital assets have thrived so swiftly that they now are systematically important.
Also Read: Crypto products, funds saw record inflows last week: CoinShares report
Bank of England official Jon Cunliffe, in his October speech, raised the 2008 subprime-mortgage-fueled crisis, and said about crypto, “When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice.”
Meanwhile, the Securities and Exchange Commission (SEC) is inquiring into how Binance operates in the US, where it has several state licenses, according to a former executive, the report stated. The Department of Justice is also scrutinising if the crypto exchange has fostered money laundering, a former executive said, the report added.
Whilst, Binance founder and Chief Executive, Changpeng Zhao acknowledged in a recent interview that the crypto exchange needs to fall into line with regulators across the world, which comprises securing proper licenses from the concerned governments.
“We run a very legit business,” he stated, adding that it has grown promptly because users trust it. However, “if you look at cryptocurrency adoption world-wide today, it’s probably less than 2 per cent “of the population,” Zhao noted. “In order to attract those 98 per cent of people, we need to be regulated,” he said.
Zhao further stated that Binance is in the process of establishing local offices and a headquarters, measures he earlier disregarded as outdated but that regulators want.
The crypto exchange had in August said on its website that it had made user identity checks compulsory to thwart the use of the exchange for illegal money flows.
According to Zhao, Binance has 3,000 employees across the world. The crypto world’s rock star boasts of 3.9 million followers on Twitter, where he is known plainly by his initials, CZ.
Also Read: UK financial regulator bans cryptocurrency exchange Binance
Born in China, Zhao moved to Canada with his parents when he was 12 years old, he said.
After studying computer science, Zhao worked in New York and Tokyo at financial companies, comprising Bloomberg LP, where he developed software for futures trading.
Zhao first heard about bitcoin at a poker game in Shanghai in 2013, he stated. Enchanted by the idea of a decentralized currency that could be used anywhere without banks or administration, he sold his Shanghai apartment for bitcoin and worked for many crypto startups.
Along with a group of other programmers, Zhao launched Binance in 2017. The exchange initially focused on trading bitcoin and numerous offshoots but didn’t permit users to exchange digital coins for conventional coins.
Zhao stated that when Binance started operating, it didn’t need any bank account and headquarters.
The crypto exchange raised $15 million in a July 2017 initial offering of its digital coin, called BNB.
When users burst forth from several countries comprising nations with less-developed financial systems such as India, Russia and South Africa, Binance became the biggest crypto exchange within six months. However, it ran into problems with authorities worldwide just as quickly.