Binance France has replaced co-founder Changpeng Zhao with two new shareholders, the company told DL News on Tuesday.
The move is designed to ensure that the world’s top crypto exchange doesn’t lose its right to operate in the European Union’s second biggest economy.
Zhao, who pleaded guilty to violating US banking law last November, owned 100% of Binance France, the crypto company’s central hub in the EU.
Under French regulations, the majority shareholder of a company cannot be a criminal.
New shareholders
Keeping Zhao in place would have endangered the company’s standing in France, and in turn, the European Union when a landmark new law takes effect at the end of the year.
“The new shareholders of Binance France are both co-founding team members of Binance,” a Binance spokesperson told DL News on Tuesday.
An official update on the French business registry shows the Binance France shares are split between Yulong Yan and Lihua He, who hold 50% each.
The question is: Who are they?
Yulong Yan, who also uses the English name Allan Yan, is identified as a team member in the original Binance whitepaper. Yan was a co-founder and product director of now-closed Chinese exchange services company Bijie Tech.
“Two years before Binance, I started a company called Bijie Tech,” Zhao wrote in a 2022 Binance blog post. “Unfortunately, in March 2017, the Chinese government shut down all such exchanges.”
Lihua He is not named in the original Binance whitepaper published in 2017.
A Binance spokesperson declined to provide any information regarding this shareholder, and did not immediately respond to a request for comment on whether Zhao was compensated for his shares.
Turning the page
The shareholder swap the latest sign Binance is trying to turn the page on the Zhao era, which hit the wall last November when Binance pleaded guilty to violating US banking laws by permitting criminals and sanctioned entities such as terror groups to use the exchange.
Binance paid a $4.3 billion penalty and agreed to hire court-approved independent monitors to develop anti-money laundering and know your customer practices. Zhao, known as CZ, was sentenced to four months in prison.
Zhao was succeeded as CEO by Richard Teng, a former Singapore central bank regulator, late last year.
Global restructuring
The ownership swap is part of a “global restructuring project” Binance is undertaking this year.
In a blog post Binance published on Tuesday, the company said the French subsidiary has made these changes to make sure it complies with rules for digital asset service providers in France.
The French Financial Markets Authority, or AMF, sent Binance a notice in December that Binance France to adjust its operations following the conviction of Zhao.
MiCA passporting
The Markets in Crypto-Assets regulation, or MiCA, allows companies to “passport” their licence from one base country to the rest of the 27-nation EU.
The new regime, which will kick in over the coming two years, is expected to foster greater investment in the digital assets industry on the continent.
That means companies like Binance need to pick one country in which to apply for a licence.
France has served Binance as an important strategic hub in Europe over the past years. Binance invested €100 million in the French crypto industry in 2021.
Binance executives have headlined events in Paris, and government officials welcomed Binance to the French capital.
But Binance also faces two investigations from prosecutors focused on potential money laundering and serving ads to the public before they were registered with a regulator.
Taken together with Zhao’s conviction, legal experts are unsure whether regulators will approve Binance’s licence under MiCA when tougher rules for exchanges go live in 2025.
Inbar Preiss is a Brussels-based regulation correspondent. Contact her at inbar@dlnews.com. Callan Quinn is DL News’ Hong Kong-based Asia Correspondent. Get in touch at callan@dlnews.com.