Our industry has entered the development and maturation phase where regulatory compliance is absolutely essential for user experience and security, business success and responsible growth. It is not possible to know for sure when this period began, but Binance, in my opinion, has a strong basis to claim that it marked the beginning of this new era. In November 2023, in an unprecedented move in the blockchain space, we took responsibility for our past issues by recognizing that even as an early-stage company in an emerging sector full of regulatory uncertainty, this could not be seen as an excuse to have insufficiently robust compliance controls.
We learned our lessons the hard way, but it has allowed us to chart the course for the rest of the industry. We invite colleagues to look at our past failures and see how we have improved and to learn from our experience, avoiding the many stumbles and difficulties we have faced along the way – these colleagues do not have to go through the same, for the benefit of the entire ecosystem and its users. We also knew that setting compliance standards for our dynamic industry is just one part of the equation, the other equally important part is the readiness and willingness of other major players to adhere to these standards. While Binance continues to do its part, are these other industry players doing enough to improve their compliance efforts? I don't think they're there yet, but I hope that changes.
Evolving Compliance is a Team Effort
Over the past few years, we have invested heavily in improving our compliance and security programs and teams, with the goal of establishing Binance as the industry gold standard in these areas and setting an example for our peers in the crypto space. We are proud of the culture of compliance, security and transparency we have created and continue to maintain through this effort.
Our enhancements included the expansion of our internal anti-money laundering (PLD) detection and analysis capabilities, including on-chain and off-chain monitoring; improvement of our identity verification protocols (KYC - Know Your Customer), reinforcement of our team and reinforcement of internal technology with the best third-party suppliers in the category; strengthening our market surveillance capacity; and building the industry's leading financial crime compliance unit, tasked with assisting law enforcement agencies around the world with cryptocurrency-related investigations and sharing with them the skills and knowledge needed to combat financial crime. Each year, we have seen the quantitative indicators reflecting the efficiency and impact of these efforts increase – at the same time that estimates of illicit activity across the sector have decreased.
Far from taking credit for all the positive changes observed, we have always maintained that this movement is a team effort. No matter how hard we try, we will never be able to take the entire industry to the next level of compliance and maturity without the active support of colleagues willing to do their part. Adopting the “a rising tide lifts all boats” vision, Binance has begun calling on other major players in the digital asset space to act as one when it comes to building trust, introducing responsible practices, and improving transparency and compliance. all around the world.
From proposing a unified framework for all centralized cryptocurrency exchanges to gain market trust to open sourcing our Proof of Reserves (PoR) system , in addition to other actions, we direct our initiatives to promote the broad participation of our colleagues in the blockchain sector and Web3 businesses. Most of all, we want our compliance improvements, shaped by painful mistakes and hard work alongside regulators, to begin to be replicated widely. Although some improvements in this direction are already visible, I believe that our industry colleagues are not doing enough.
Boat or tide?
Implicit in the "rising tide" metaphor is the idea that once a large wave of positive change enters an industry, all participants benefit from it. This goes for an industry-wide compliance upgrade: once all major industry players are fully compliant, with the least responsible being forced to adapt to the new standard or leave the market, we will enter a virtuous circle of trust increasingly solid, further driving adoption. What the metaphor does not specify is who should be the tide driving change and who is the boat waiting to be lifted. Let me clarify this: Binance is not the tide. This tide is made up of all of us and our users are the boats.
We are aware that to this day, some of our largest and strongest colleagues – the types of entities that should be driving change for the benefit of the entire ecosystem – are not performing at their best. Some turn a blind eye to wash trading, others have yet to introduce strong surveillance and transaction monitoring practices, and others allow sanctions violations. Some, unfortunately, allow all of this at once.
The truth is that these participants have not yet suffered the same consequences of these failures as Binance did, but that does not mean they never will. Even if they manage to avoid immediate regulatory oversight – which is far from guaranteed – and associated sanctions, in the long term, avoiding compliance best practices will contribute to the loss of user trust and the ruin of their business. Even more importantly, whatever tactical benefits may be gained from sloppy anti-money laundering policies and lax identity verification, such behavior ultimately hampers the growth and maturation of the entire industry, negatively affecting all of its participants and users in a major way. very significant.
Therefore, my appeal to our colleagues is this: learn from Binance's mistakes rather than making your own – making your own mistakes will be much more expensive. Don't be the boat that is calmly waiting for the tide to lift you; be the tide. Today, being fully compliant is what the entire crypto and blockchain sector needs to maintain its exponential growth trajectory. This is also what our users want and need. Ultimately, this is what will help our innovative, mission-driven industry get closer to its ultimate goal: promoting financial freedom and tangibly improving people's lives. So be the tide.