During the Tbilisi Silk Road forum, held on October 27 in the capital of Georgia, Olga Zemtsova, CP Media Reporter, had a chat with Richard Teng, Head of Regional Markets at Binance (update: on November 22, Changpeng Zhao, CEO of Binance, stepped down from his position. Richard Teng has been named the new chief executive). The top manager of the largest centralized crypto exchange shared quite a lot of interesting things about the global trends in crypto industry regulation and his experience in working with regulators. He also revealed Binance’s secret to success that helps the exchange retain its market leadership despite shifts in the legal environment.
— How would you describe the current global trends in digital asset market regulation? How is Binance dealing with dynamically changing regulatory requirements in different countries?
— If you compare the situation to what it was five years ago, the current trend is one where you get more regulations. The direction of travel is adding more regulations, which is good for the industry because a lot of institutions and retail users need to see proper regulations coming to the crypto sphere to continue investing. Mass adoption will take place if two factors come into play. The first is regulation that gives user confidence, and the other is a more institutional adoption. We’re seeing both factors at play. That’s a huge possibility.
Unfortunately, one of the things inhibiting the global growth of cryptocurrencies is that there’s no legal standardization. Some regulators treat crypto as securities, while others treat it as commodities. Some consider it a digital payment token, and others treat it as a virtual asset. So, all these inconsistencies make it tough for a global platform like ours to operate, because you have to understand how crypto is regulated in every region, in every jurisdiction. You don’t have a standard set of requirements that would apply globally, though it would make our lives much easier. Therefore, implementing cryptocurrencies locally is challenging, because you have to understand what the regulators’ positions are, and some of these rules and regulations are competing with each other. So, there’s no easy deployment for players like us. What we hope for is more harmonization of standards.
— Lately, Binance has been facing some regulatory pressure, which is also affecting its relationships with other large companies. For example, Visa and Mastercard stopped their cooperation with Binance on issuing crypto cards. What’s the reason behind this pressure, and does the company have a strategy to escape from it?
— If you look at where Binance is today, and we’re a six year old firm, it’s clear that we’ve progressed very strongly from a tech startup in that time. I’ve already mentioned that five years ago, no regulator had any control over this space. We’ve grown from a tech startup to a financial institution. We’re the most regulated exchange in this area.
Binance has 18 regulatory approvals throughout the world, making us the most regulated exchange.
We’re under regulatory scrutiny all the time. And we’re used to that. We work closely with international regulators and policymakers to meet and uphold high standards wherever we are. I’d like to stress this point.
Standards and requirements are constantly evolving. We have to make sure that we keep pace with them. A lot of times, our partners have their own risk appetite and different risk tolerance issues. Sometimes they are supportive of cryptocurrencies, and other times they are not. However, we respect them on that front. We continue to educate our partners on crypto technologies, their usage, how they allow us to track money laundering issues much better than traditional fiat money, counter terrorist financing, etc.
We educate not only our partners but also regulators and policymakers. For example, we conducted 80 classes last year with global law enforcement agencies to inform them about the power of this technology and how it facilitates bringing some of the illicit money under control. We will continue to work in this direction.
So, we support crypto adoption. We take into account the needs of our users and are grateful to them. Despite the unpleasant news you’ve mentioned, our user base continues to grow strongly. We now have more than 150 million users. And that’s a testament to our strength, as well as our focus on supporting and protecting our users.
— Could you please share Binance’s ongoing plans for the European market and your take on MiCA? How will the new regulation reshape the landscape of the local cryptocurrency market?
— First of all, I really applaud the European regulators’ efforts to introduce and implement MiCA. It’s a very important legislation, because with one license, a crypto company can be registered throughout Europe. Therefore, we’re working closely with European regulators on this matter. We’re looking forward to the results because as of now, as I’ve mentioned, there’s disparate treatment of cryptocurrencies. Hopefully, MiCA will provide a foundation for other regulators looking to introduce crypto regulation to use it as a benchmark of sorts to look at what is best for their own jurisdictions. We have more than six licenses already in Europe. We continue to work closely with European regulators to drive implementation through to completion.
— In which regions of the world do you, as an expert with insider information, see the greatest potential for growth for Binance?
— I would say that we consider every region where there’s very strong growth. From Asia-Pacific to the Middle East, from Africa to the Caucasus, and from Latin America to Europe. There are normally two factors. If these two factors are present, we usually see a very rapid adoption of cryptocurrencies. What are the factors? The first is a very young demographic. When you have a young, tech-savvy demographic, cryptocurrencies are usually adopted much faster compared to countries with an older population. And it’s not as tech-savvy because it has to do with future technologies. Generally, the younger population learns them quite quickly, spends a lot of time doing their own research and education, and becomes pretty competent very fast.
The second dimension that we see bringing about crypto adoption is a lower level of financial inclusion. So, if the population is well supported, financial services are available to everyone in a cheap fashion, then the adoption of cryptocurrencies tends to be slightly slower. But many parts of the world don’t have that. Financial services are extremely expensive. Things like remittances can cost up to 10% of the amount being remitted. It takes two to three days to receive the transfer. Whereas with cryptocurrencies, remittances and payments can be made instantly. It’s a 24/7 service, while traditional banks operate only on a Monday through Friday schedule. Cryptocurrency has become the first truly public infrastructure that allows the masses to access it, make transactions with it as a store of wealth at a fraction of the cost of traditional finance.
— What are the key challenges and issues Binance faces on its way to expanding its influence and presence in the global crypto market?
— There are three key groups of stakeholders that we need to continue to engage with and serve them well so that we can continue to drive much stronger adoption of cryptocurrencies. We’re here to support the idea of financial freedom for our users. So, the very first important constituents are our users. We aren’t cheap. We won’t make it without their support. We’re thankful for their confidence and continued support of Binance. The company continues to grow from strength to strength. From a very small company of 13, now we’re into thousands of accounts. From our humble, small startup, we have now grown to more than 150 million users globally. We make sure that we continue to meet the needs of our users in terms of products and services, ensuring that they are adequately protected. Those aspects are paramount for us. So, it’s one of the stakeholder categories. We have to make sure that we continue to take care of their interests and meet their needs.
The second group is partners, including media, banking, card, and payment partners. We work closely with partners. They are often not quite as savvy or not as knowledgeable about cryptocurrencies. We spend a lot of time engaging them on that front and working with them to support crypto adoption.
And the third important group is policymakers, legislators, and regulators. Again, we spend a lot of time with this group highlighting the benefits and potential of the Web3 industry, the cryptocurrency market, and the blockchain sector. The benefits they bring to the economy. If they support this sector in the right fashion, if they build the ecosystem in the right manner, if they have proper smart regulations that regulate the risks but at the same time support the innovation part of blockchain, then everyone in the Web3 sphere benefits. So those are the three key stakeholders we spend a lot of time with.
As long as we make sure that their needs are being met and taken care of, we will continue to succeed.