As Binance Shrinks in Asia, Will it Shift to the Middle East?
Binance has skillfully maneuvered through dozens of regulatory ecosystems to become the world’s largest cryptocurrency exchange with daily trading volume exceeding that of its next four competitors combined. But even though its CEO Changpeng Zhao recently became Asia’s richest man, according to the Bloomberg Billionaire Index, the company’s presence in Asia – where Binance got its start – is shrinking, while its current headquarters remain surrounded of mystery.
Binance is currently ending its digital token payment business in Singapore after it became clear that regulators would not approve its crypto license application, and all client accounts on Binance.sg will close on February 13, according to the society.
The crypto exchange is also currently banned or battling regulatory challenges in Hong Kong, Japan, Malaysia, and Australia, not to mention Italy, the UK, and the US. Binance left China, where it was founded, in 2017 before a wave of government crackdowns there. crypto companies.
Pakistan recently became the latest country to open an investigation against Binance in connection with an alleged US$100 million fraud perpetrated by Binance-integrated apps.
Binance operates in countries through approximately 50 entities, but it is not publicly known where in the world its parent company or headquarters are registered. Last year, it was reported that Binance was registered in the Cayman Islands – but the island nation later forcefully dispelled that rumour, saying it had no regulatory authority over the crypto exchange.
When contacted by Forkast, a Binance spokesperson said, “We do not comment on specific issues with regulators and law enforcement authorities. However, our general approach is to cooperate with investigations where possible. Binance did not respond to questions from Forkast regarding its registered office.
Last year, in a video interview, CEO Zhao said Forkast that “for binance.com, we’re actually not based anywhere”. The previous year, he had also mentioned not having a defined head office as a point of pride – something akin to decentralization.
But the growing regulatory heat has caused a change of heart at Binance on matters concerning the headquarters. In a more recent interview, Zhao – also known as “CZ” in crypto circles – told the South China Morning Post: “For centralized exchange activity, we need to be centralized…with controls very strict risk.”
Binance now hopes to set up its new headquarters in the United Arab Emirates and has held talks with officials in the cities of Abu Dhabi and Dubai, where CEO Zhao recently purchased a new home, according to Bloomberg.
The opacity of Binance’s corporate structure has irked regulators and customers, especially those trying to seek accountability or legal remedies when things go wrong. A company operating without a head office is also something crypto legal experts say they find hard to believe.
“In reality, Binance is incorporated somewhere and there are specific companies that are responsible for specific things that could be held liable if something goes wrong. But the problem is that it’s impossible to know,” said Aija Lejniece, Paris-based cryptography lawyer. Forkast.
Binance’s terms and conditions significantly limit not only Binance’s liabilities, but also the legal remedies users can seek, although the legal validity of these clauses is unclear.
For example, Binance’s terms state that the company is not liable for any damages resulting from Binance’s services or their failure. Additionally, the terms state that in the event of a dispute, users cannot sue in their home country, but must resort to international arbitration, which can be prohibitively expensive. The median cost of arbitration at the Hong Kong International Arbitration Center, for example, is close to $65,000.
“So unless you’ve lost a lot of money and you still have money, most people aren’t able” to pursue any legal recourse against Binance, Lejniece said.
Hiding behind a corporate veil can help a business save on taxes if registration is in a tax-friendly jurisdiction. It can also help a business avoid the regulatory compliance burden and cost of obtaining a license in more stringent jurisdictions.
As crypto regulators step up their scrutiny of companies like Binance, will Binance’s corporate structures become more transparent? So far, the crackdowns may reduce the number of places Binance can operate – or hide.