2023-11-25 09:00:09
Published on Nov. 25, 2023 at 8:00 a.m.
Richard Teng, 53, has the fate of Binance in his hands. He inherits Changpeng Zhao (CZ), who has resigned, a world leader but weakened and under close surveillance by the American justice system. No missteps will be tolerated. The boss assured him, the crypto multinational will work closely with regulators across the planet.
Having arrived late at Binance, in the summer of 2021, four years after the creation of the group, the new strongman of the platform has references that are more acceptable to regulators. He has notably worked at the Central Bank of Singapore (MAS, Monetary Authority of Singapore) and as head of regulatory compliance at the Singapore Stock Exchange.
In this existential crisis, the group must reassure its 128 million customers in order to avoid a flight of its capital to competing platforms like Coinbase and Kraken. The assets are perfectly safe at Binance, reiterated Richard Teng. Binance took advantage of the collapse of FTX in November 2022 to occasionally gain market share. But it was quickly overtaken by the crisis of distrust towards the platforms and by complaints from regulators of the futures markets (CFTC) and the Stock Exchange (SEC). The platform, which captured nearly two-thirds of global crypto volumes a year ago, processes less than half today. It will have to ensure that it no longer accepts contentious clients (trafficking, money laundering, etc.). Already in September, it closed its subsidiary in Russia, taken over by the CommEX platform.
For a period that could last five years, teams from the US Department of Justice and the Financial Crimes Agency (FinCEN) will be seconded to Binance. 24 hours a day, 7 days a week, the group must provide them with all the documents (procedures, customer files, archives, etc.) that they request. And they will be able to question all the employees. Binance will also have to spend considerable sums on regulatory compliance, audits, lawyers and consultants. So much money that it will not be able to invest in its development and growth.
Raising prices and commission levels to raise funds could risk driving away customers. In addition to its profits in reserves, thanks to exceptional years like in 2021, Binance could cut back on certain activities or sell them. From 2022, it began to significantly strengthen its regulatory compliance teams but the group also experienced a wave of departures the following year. Sensing the wind turning, employees, fearing a scenario similar to that of FTX, had distanced themselves from CZ, now public enemy number 1 on cryptos for the American authorities.
Transparency
Criticized for its lack of transparency (revenues, debts, shareholders, etc.), Binance had until now taken refuge behind professional secrecy. Providing information would, he said, have favored his competitors. Not being listed on the stock exchange like Coinbase is, the group felt perfectly within its rights. Will the inextricable nebula of shell companies in its organizational chart be modified to reflect the group’s new departure? In any case, he will have to shed light on some of his controversial activities.
Like FTX with its Alameda Research firm, Binance has proprietary trading firms, owned by CZ. The latter will hardly be able to continue to own it. He will not be able to be part of Binance’s future board of directors, which must include three independent directors. The agreement reached with the courts also imposes many more reservations in its declarations, particularly on social networks. Recklessly, he had mocked the futures regulator’s complaint against Binance by comparing it to “fake news”. Such verbal deviation which is now forbidden to him. His fate will be decided on February 23. He could spend up to eighteen months in prison.
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