What is to be made of Binance founder Changpeng ‘CZ’ Zhao’s determination to reduce his stake in the US segment of the company he founded?
A report from The Information on Thursday quoting “people familiar with the matter” discussed how CZ and Binance.US leaders are discussing ways for CZ to exit his position in order to improve the world’s largest cryptocurrency exchange’s relationship with US regulators.
Though Binance nor CZ have commented on the matter (Proactive has reached out for a statement), it's no secret that there is little love between CZ and the regulators.
In a civil suit filed in March, The US Commodity Futures Trading Commission (CFTC) accused the company and its founder of soliciting potentially illegal derivatives products to US customers.
Meanwhile, the Securities and Exchange Commission (SEC)’s accusations against the exchange (and pretty much every other player in the crypto space) make for a rap sheet of securities violations too long to list here.
All this has led to Binance’s BUSD stablecoin being banned, Binance’s US$1bn acquisition of bankrupt crypto lender Voyager being blocked, and Binance suffering a spate of mass withdrawals threatening the platform’s overall liquidity.
There’s no doubt that the pressure is on for Binance to make good with the watchdogs if it wants to sustain any sort of presence in the country.
But how does CZ’s disposal of Binance.US stock do anything to help this process?
CZ is a Canadian citizen, and he identifies as such, but his apparent links to China have consistently come under scrutiny in the media, including from The Financial Times, which suggested that Binance hid “extensive links to China” for several years in a report earlier this year.
CZ and Binance have vehemently shot back at these accusations.
“It is unfortunate that anonymous sources are citing ancient history (in crypto terms) and dramatically mischaracterising events. This is not an accurate picture of Binance’s operations,” Binance said in response to the FT’s claims.
Though there may be a compelling case for linking Binance’s historical operations back to China, CZ also makes a compelling case of good old Xenophobia.
“The inference is that because we have ethnically Chinese employees, and perhaps because I am ethnically Chinese, we are secretly in the pocket of the Chinese government,” CZ said back in September, hitting back at what he sees as conspiracy theories.
“Our broader employee base is even more globally distributed. Despite these facts, some people insist on calling us a ‘Chinese company,’” he added.
No wonder then, with not just Binance’s operations but CZ’s ethnicity under the microscope, is he seeking an exit from his company’s US-based operations.
This only adds to the possibility of Binance coming to the UK, something that Binance’s chief strategy officer has strongly alluded to.
Hillman stated earlier this week that Binance would do “everything we possibly can” to gain regulatory recognition in Britain, where prime minister Rishi Sunak has taken strides in promoting the country’s crypto credentials.
Maybe an IPO on the London Stock Exchange down the line isn’t such a stretch after all.