Binance Will Suspend Decentralized Headquarters to Appease Regulators

Kavya  |  Sep 17, 2021

Binance, the world's largest cryptocurrency exchange, intends to suspend its decentralized operating model in favor of a centralized headquarters.

Binance Will Suspend Decentralized Headquarters

Binance's founder and CEO, Changpeng "CZ" Zhao, has announced the exchange's ambitions to establish a coherent headquarters in a specific area.

Binance will suspend its decentralized operating architecture to be more legally compliant, Zhao stated in a Wednesday interview with the South China Morning Post.

However, the CEO did not specify where the exchange will be based.

Despite being a centralized corporation, Binance started in 2017 and has used a decentralized business model for years. It has several sites across the world.

The Exchange's Decentralized Operating Approach, According To Zhao, Is Frequently Frowned Upon By Regulators

The exchange stayed outside of the authority of any one country due to the decentralized nature and lack of a set headquarters. 

However, with new intentions to operate from a consolidated headquarters, complete legal registration will very certainly be necessary.

Zhao explained why the exchange chose to operate from a single location:

“The regulators inquire, 'Where is your headquarters?

Well, we don't have a headquarters,' we say. That is not acceptable to regulators. They are unable to cooperate with us. They even suspect we're shady at times.”

Although Binance had previously registered in the Cayman Islands and created a branch in Malta, it did not get a license to operate in either state.

Binance has been under intense scrutiny from financial regulators all around the world in the last year. 

Many nations, including the United Kingdom, Poland, Italy, Japan, Malaysia, Singapore, and Thailand, have issued warnings to the exchange for providing trading services without a license. 

Furthermore, the US Department of Justice and the Internal Revenue Service were allegedly examining the trade early this year.

Due To Rising Scrutiny, The Exchange Takes Various Efforts To Comply With Authorities

While operating from an official location exposes the business to new regulatory obligations, it should also make the firm more compliant. 

Zhao explained how the change will make working with regulators easier:

“We need to be centralized for the centralized exchange business. We need a centralized organization behind it with clear investors, good board governance, highly open KYC/AML procedures, and robust risk controls.”

Binance is demonstrating its commitment to cooperation with regulators by establishing a centralized legal organization. 

As it has come under criticism in recent weeks, the exchange has taken numerous additional efforts to comply, including lowering leverage limits, instituting a required KYC procedure for new users, and employing a former IRS inspector to combat money laundering. 

The current action is another step toward satisfying authorities and obtaining the required authorization to serve its clients globally.

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