Changpeng Zhao, the widely recognized founder and majority stakeholder of the cryptocurrency exchange, Binance, has been under the microscope of federal regulators in the United States over the past year. As the helm of this global crypto exchange, he has been exploring ways to decrease his ownership in the US subsidiary, Binance.US, to mitigate the escalating scrutiny.
The Regulatory Pressure on Binance.US and CZ
In the world of cryptocurrencies, Binance.US and its esteemed founder, Changpeng Zhao, have been facing increased pressure to modify CZ’s role in the organization due to intensified regulatory scrutiny. This step is seen as a reaction to the growing concerns raised by the US regulators over the past year.
Reports suggest that the crypto mogul, who owns the lion’s share of Binance.US, has been contemplating diluting his stake since the previous year’s summer. These revelations were put forth in a report by The Information, citing sources privy to these developments.
Binance, with Zhao at its helm, has been on the receiving end of rigorous scrutiny from US federal regulators over the recent past. The pivotal event occurred in March when the Commodity Futures Trading Commission (CFTC) took legal action against Binance and CZ, alleging their involvement in operating an “illegal” exchange with a “mock” compliance program.
The crypto exchange was accused of deliberately circumventing US laws and exploiting regulatory arbitrage to their commercial advantage. Binance, in response to these allegations, has staunchly upheld its compliance with regulatory norms.
A Shift in Binance.US Leadership Dynamics
In light of the ongoing legal challenges, the top brass at Binance.US has been reportedly exploring ways to diminish CZ’s stake and control over the company. That aligns with the concerns that CZ’s continued majority ownership might pose hurdles in obtaining regulatory licenses.
Compounding the situation further, in February, the Securities and Exchange Commission (SEC) initiated legal action against Paxos, the issuer of Binance’s stablecoin, BUSD. That led to a cessation of stablecoin minting. Concurrently, the regulator also hindered the approval of a Binance.US bid for assets owned by the bankrupt cryptocurrency lending company Voyager Digital.
The SEC is laser-focused on enforcing strict regulations on American-based crypto exchanges, aligning them with banks’ and stock brokerage firms’ regulatory standards.
The Ripple Effect: Crypto Industry Exodus from the US
The ripple effect of this regulatory clampdown has been a mass exodus of major crypto entities from the US. Prominent players such as Coinbase, Gemini, Ripple, and Galaxy Digital are reportedly considering a move offshore following recent SEC enforcement actions.Â
Other renowned exchanges, including Kraken and Bittrex, have either entirely or partially ceased their services in the United States, further signaling the escalating tensions in the crypto realm.
In conclusion, the narrative surrounding Changpeng Zhao and Binance underscores the growing regulatory pressures the cryptocurrency industry faces, particularly in the United States. As the situation evolves, the industry and investors keenly await the next chapter in this unfolding story of crypto regulation and compliance.
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