On August 2, the U.S. Department of Justice considered filing fraud charges against Binance. At the same time, CZ announced in August that the number of registered users of Binance had reached 150 million. This figure was still 140 million in CZ’s sixth anniversary letter in July.

Today, this article will analyze the development of Binance from a compliance perspective in the face of regulatory disputes and rapid growth in the number of users👇🏻

1⃣Binance’s regulatory challenges

2⃣Compliance licensing country situation

3⃣Binance’s Compliance Structure

4⃣Market share and changes

5⃣Summary

1. Regulatory challenges faced by Binance

In 2023.3, the U.S. Commodity Futures Trading Commission (CFTC) filed a civil lawsuit accusing Changpeng Zhao and the three entities operating the Binance platform of violating the Commodity Trading Act.

In 2023.6, the SEC filed legal charges against Binance, claiming that it violated securities laws.

However, on July 25, Binance initiated a motion to dismiss the CFTC’s lawsuit; regarding the SEC’s lawsuit, the judge also strongly rejected the SEC’s request to freeze Binance’s assets.

2. Compliance licensing countries

Judging from Binance’s actions above, Binance is not in a weak position in the regulatory environment. How much impact will this series of regulatory measures have on Binance’s global development pattern?

Let’s first take a look at Binance’s current compliance status in various countries. Currently, the compliance license countries Binance has obtained are as follows👇🏻:

In Europe there are:

1) France;

2) Italy;

3) Li Tao Yuan;

4) Spain;

5)Poland;

6) Sweden;

7) Kazakhstan;

In the Middle East there are:

1) Abu Dhabi;

2) Bahrain;

3) Dubai;

In the Asia-Pacific region they are:

1) Australia;

2) Indonesia;

3) Japan;

4) New Zealand;

5) Thailand;

There are also countries such as Mexico and South Africa.

According to incomplete statistics, OKX has achieved compliance in Dubai, France, the Bahamas, Japan, etc.;

And Coinbase has the United States, Japan, Singapore, the United Kingdom, Ireland, Germany, etc.;

From the perspective of countries that have obtained compliance licenses, Binance has an absolute advantage in both quantity and distribution.

At the same time, the licensed exchange Binance Japan went online in August, and Binance Dubai also obtained its first MVP operating license. It is currently the most compliant trading platform in the world.

3. Binance’s Compliance Structure

Judging from the official documents disclosed by Binance, its compliance department currently has more than 750 employees.

Binance’s compliance team is divided into multiple specialized departments, each responsible for specific functions and areas of expertise, including 👇🏻:

1) Financial Crime Compliance: The Financial Crime Compliance Team is an important part of Binance’s compliance program.

The team is primarily a proactive investigative frontline targeting illegal activity on the platform.

By actively combating financial crimes such as money laundering, fraud, and terrorist financing, they contribute to protecting Binance and its users from a variety of potential risks.

2) Global Anti-Money Laundering: The Global Anti-Money Laundering (GMLRO) team plays a key role in ensuring compliance with global Anti-Money Laundering (AML) regulations.

Detect, monitor and prevent potential money laundering related activities. They work closely with local financial intelligence units, regulators and law enforcement agencies to report and assist in the investigation of suspicious actors and transactions.

3) Sanctions/Anti-Corruption/CTF: The Sanctions, Anti-Bribery/Corruption/Counter-Terrorism Financing (CTF) team is responsible for developing policies and controls to mitigate risks associated with violations of applicable sanctions, anti-bribery and corruption laws and counter-terrorism financing measures;

4) Corporate compliance: This team is responsible for monitoring and testing of multiple controls;

Handle regulatory inspections and audits of Binance licensed entities; ensure compliance controls are embedded in all Binance products and services;

5) Customer Due Diligence: Binance’s Customer Due Diligence (CDD) team is responsible for implementing robust Know Your Customer (KYC) and Know Your Business (KYB) programs that prevent fraud, identity theft, money laundering, and fraud plays a vital role.

6) High-risk customers: The high-risk customer team focuses on overseeing the enhanced due diligence process for high-risk customers and businesses;

7) Transaction monitoring: Binance’s transaction monitoring team is responsible for reviewing transactions for potential money laundering and terrorist financing activities;

For Binance, compliance is one of the most important strategic priorities. Judging from the structure of its compliance department, Binance already has a relatively mature system in terms of compliance.

4. Market share and changes

As can be seen from data from The Block, Binance’s current market share of cryptocurrency trading volume is 51.8%;

At the same time, according to Tokeninsight statistics, its exchange market share was 53.6% at the beginning of Q2 and 50.6% at the end of Q2, maintaining a stable leading position.

So will the SEC regulation in June have an impact on Binance? We can find out from the data.

As shown in the figure, the market share of Binance’s spot trading volume increased by 2% in June compared with May when the SEC filed the lawsuit. There was a slight fluctuation compared with the first quarter because the zero-fee trading activity of BTC/ETH increased in March. It ended and returned to the previous normal level.

The market share of derivatives trading volume was 54% in both May and June, and there was no major impact;

Binance launched the Merkle Tree Proof of Reserve (PoR) in 2022. Up to now, Binance has issued a total of 8 reserve certificates. Judging from Binance’s reserve situation, Binance’s assets are currently fully redeemable. User asset capabilities.

Proof of Reserves (PoR) | Merkle Tree | Binance https://www.binance.com/zh-CN/proof-of-reserves

5. Summary

Even under regulatory pressure, the reasons why Binance has remained the market leader and even increased the number of registered users to 150 million are:

1) Have proof of complete asset reserves;

2) Compliance work is at an advantage in CEX;

3) Coin listing/new coin mining maintains a good rate of return;

4) Product experience and operations are in a leading position in the industry. It must be said that the regulatory challenges faced by Binance are indeed severe, but it is still the largest and safest CEX in the minds of investors.

Recently, Binance has also launched new currency mining activities for Cyberconnect and Sei. The former is a leading social protocol that raised $25M, and the latter is a Layer 1 rookie that raised $35M.

Users can buy tokens for free by staking BNB/TUSD/FDUSD. The current rate of return is unknown, but players who are optimistic about these two projects can try it. The APY of blind mining is generally not bad.