The chief executive of cryptocurrency exchange Binance just published an interesting statement, promising to double the size of the firm’s compliance team by the end of this year and to invest in various other compliance program efforts — all while regulators around the world are putting Binance and its operations under a microscope.
Changpeng Zhao, who founded Binance in 2017 and goes by the nickname “CZ,” published his open letter on the Binance corporate blog on Tuesday to coincide with the firm’s four-year anniversary. He talked about the firm’s rapid growth, welcomed the idea of more regulatory oversight for cryptocurrency, and outlined plans to strengthen Binance’s compliance operations in the coming months.
So if you’re a compliance professional looking for a new gig and not afraid to try an industry that’s still pretty much the Wild West, maybe Binance is a place to send your resume.
Exactly what did CZ say about compliance hiring? He was careful with his words. Binance has “grown our international compliance team and advisory board by 500 percent since last year,” which is not the same as saying you increased your compliance staff by 500 percent.
For example, the firm likes to tout its recent hiring of Rick McDonell, a former executive secretary of the Financial Action Task Force and executive director at ACAMS; and Josée Nadeau, former head of the Canadian delegation to the FATF. They were hired to provide “strategic guidance on regulatory policies, along with bolstering the organization’s international AML/CFT programs and best practices.”
OK, but are they really working to build Binance’s compliance program at the ground level, or to talk about doing that from a high level? That’s not easy to discern from the statements Binance makes.
Then again, Binance also announced this week that Jonathan Farnell has joined the firm as director of compliance for European operations. He will report to Binance chief compliance officer Samuel Lim, who has been with the firm in the CCO role at least since April 2019. Farnell does seem much more the type of hire you make to build an actual program that does actual things.
Back to CZ and his letter. He goes on to say that Binance plans to double its compliance team by the end of 2021; and on its website the firm does list a half-dozen compliance analyst openings around the world. I also suspect Binance’s legal time is looking for compliance expertise considering how much legal scrutiny it’s facing these days.
We also have that Binance.us part of the equation. Technically, Binance and Binance.us are not the same thing, because Binance itself isn’t allowed to operate in the United States. Binance.us just announced that it has hired Manuel Alvarez, former head of the California Department of Financial Protection and Innovation, as chief administrative officer.
Alvarez will report to Binance.us CEO Brian Brooks — yes, that Brian Brooks, who ran the Office of the Comptroller of the Currency during the Trump Administration. So you can see that all parts of the Binance operation are sucking up any regulatory experience they can find, as the firm tries to suck up to regulators wriggle its way into good regulatory standing. Binance.us also seems to be hiring a few compliance analysts, although not nearly as many as one might expect.
Bottom line: if you have AML compliance experience and want to take a gamble on the crypto world, Binance needs help. Drop me a line at [email protected] to let me know what it’s like working there.
Life in the Crypto World
CZ’s letter is also notable for how he frames Binance’s delicate position these days. He admits that Binance is under heavy scrutiny (for example, the company got banned from the United Kingdom two weeks ago), but says that’s a welcome development; it means regulators will lay the foundations for wider, more sustainable trading in crypto assets in the future. He likened crypto today to the arrival of the automobile in the early 1900s, before traffic laws came into force.
“Crypto is similar in the sense that it can be accessible for everyone, but frameworks are required to prevent misuse and bad actors,” CZ wrote. “Clarifying and building the first set of standards is critical for the industry’s continued growth. And Binance wants to be a positive contributor.”
Ummm, sure. I suppose CZ’s point is true in an abstract sense, and Binance can certainly try to voice its opinion in rules that might affect its future growth. But it’s also true that Binance is under investigation for allowing money laundering and tax evasion to course through its exchanges. Cryptocurrency is a financial vehicle tailor-made for fraud, and the Biden Administration has made more attention to crypto a central pillar of its crackdown on global corruption.
We also can’t ignore the fact that Binance has its origins in China, although the company has subsequently moved its servers and some of its operations to Japan. It also still has an opaque ownership structure, with kooky claims that Binance has no headquarters in the traditional sense.
How will all of that mystery and risk translate into greater regulatory oversight for cryptocurrency in general, and for Binance in particular? We don’t yet know, although clarifying who oversees what issues in crypto is one priority for new SEC chairman Gary Gensler.
CZ, meanwhile, says “We humbly welcome more constructive guidance to help us to grow better.”
I strongly suspect more guidance is exactly what he’ll get, in spades.