From Our CEO: Be The Tide That Lifts All Boats
Our industry has entered the phase of its development and maturation where regulatory compliance is absolutely essential to user experience and safety, business success, and responsible growth. It is debatable when exactly this period began, but Binance, in my opinion, has a strong claim for having punctuated the start of the new era. In November 2023, in a move unprecedented in the blockchain space, we took responsibility for our historical issues, admitting that even being a young business in a nascent field in the state of regulatory uncertainty cannot be viewed as an excuse for having insufficiently robust compliance controls.
We have learned our lessons the hard way, but that allowed us to chart the path for the rest of the industry. We invited others to look at where we fell short and how we improved, and learn from our experience to avoid suffering the many bumps and bruises that we’ve taken along the way – so that our peers don’t have to, for the benefit of the entire ecosystem and its users. We also knew that setting compliance standards for our dynamic sector is but one part of the equation, with another, equally important part being other major players’ readiness and willingness to get up to these standards. While Binance continues to hold up its part, are others in the space doing enough to up their compliance game accordingly? I don’t think they are there yet, but I do hope this will change.
Compliance Evolution is a Team Effort
Over the course of the past several years, we have invested heavily in enhancing our compliance and security programs and personnel, with the goal to establish Binance as the industry’s gold standard in these areas and to set 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 significantly expanding our in-house anti-money laundering (AML) detection and analytics capabilities, including on and off-chain monitoring; improving our identity verification (KYC) protocols, supplementing our in-house team and technology with best-in-class third-party vendors; strengthening our market surveillance capacity; and building the industry’s leading financial crime compliance unit tasked with assisting law enforcement agencies globally in cryptocurrency-related investigations and sharing with them the skills and expertise needed to combat financial crime. Each year, we saw the quantitative metrics reflecting the efficiency and impact of these efforts go up – simultaneously with industry-wide estimates of illicit activity shrinking.
Far from taking credit for all of the observed positive change, we have always maintained that this is a team effort. No matter how hard we try, we will never be able to pull the entire industry to the next level of compliance and maturity without the active support of our peers willing to pull their weight. Adopting the view that “a rising tide lifts all boats,” Binance began calling for 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 across the board.
From proposing a unified trust-building framework for all centralized crypto exchanges to open-sourcing our proof-of-reserves (POR) system code and beyond, we geared our initiatives toward wide participation of our fellow blockchain and Web3 businesses. Above all, we wished our compliance enhancements, shaped by painful mistakes and grueling work alongside regulators, to start being widely replicated. While some improvements in this direction are already visible, I believe our industry peers are not doing enough.
Boat or Tide?
Implied in the “rising tide” metaphor is the idea that once a sweeping wave of positive change comes into an industry, every participant stands to benefit. This holds true for an industry-wide compliance upgrade: once all major players in the field are fully compliant, with less responsible ones forced to get up to the new standard or fold, we will enter a virtuous cycle of ever-solidifying trust, driving even more adoption. What the metaphor does not specify is who should be the tide driving the change, and who is the boat waiting to be lifted. Let me make it clear: Binance is not the tide. The tide is all of us, and our users should be the boats.
We are aware that to this day, some of our largest and strongest peers – the kind of entities that should be driving change for the benefit of the entire ecosystem – are not bringing their best game. Some turn a blind eye to wash trading, others are yet to introduce strong surveillance and transaction monitoring practices, yet others allow sanctions violations. Some, unfortunately, check several of these boxes at once.
True, these players haven’t yet suffered the same consequences of such shortfalls as Binance has, but it doesn’t mean that they never will. Even if they manage to avoid immediate regulatory scrutiny – which is far from warranted – and attendant sanctions, in the long run, eschewing best compliance practices will contribute to the erosion of user trust and the deterioration of their business. Even more importantly, whatever tactical benefits can be gained from lax anti-money laundering and identity verification policies, such behavior ultimately hinders the growth and maturation of the entire industry, negatively affecting all of its participants and users to a much greater extent.
Therefore, my call to our peers is this: learn from Binance’s mistakes instead of making yours – the latter will be way costlier. Don’t be the boat quietly waiting for the tide to lift it; be the tide. Today, being fully compliant is what all of the crypto and blockchain industry needs to maintain its trajectory of explosive growth. This is also what our users want and need. Finally, this is what will help our innovative, mission-driven industry to get closer to its ultimate goal: advancing financial freedom and making people’s lives tangibly better. So, be the tide.