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The CFTC’s Charges Against Binance and More at FTCrypto


On a cold May morning, a few days after the Coronation of King Charles III, the who’s who of crypto and digital assets met at the Crypto and Digital Assets Summit. Organized by the Financial Times the event is a chance for stakeholders to gather and discuss all things crypto, defi and much more.

With our editorial team being represented in Dubai as well this week, it was an honour to be able to represent #DisruptionBanking at one of the leading crypto events in London. The event kicked off with an excellent keynote interview with David Mercer, Chief Executive of LMAX Group. David reminded the audience that “if you don’t have a blockchain strategy, you haven’t got a strategy”.

Soon after, the Policymakers Panel became the centre of attention. Fresh from speaking at Consensus2023, Kristin Smith, CEO of the Blockchain Association, reminded the audience how important regulation is after the fallout of FTX. This was followed by some excellent insights by Noah Perlman, Chief Compliance Officer at Binance, who has only been in the role for the last three months.

The CFTC’s Case against Binance

At the end of March the CFTC charged Binance and its founder, CZ, with willful evasion of Federal Law and operating an illegal digital asset derivatives exchange. In the charge CFTC Chairman Rostin Bahnam highlighted how “for years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.”

Against a tough backdrop which is the charge itself, Noah Perlman spoke confidently at the summit today. He highlighted how he brought 14 years of experience in compliance within traditional finance (at Morgan Stanley) to the role at Binance. He also spent three years at Gemini. What Noah explained is that over the last four years he had seen more activity from regulators and others that affected the concept of reputational risk.

On the case itself, Noah was unable to comment, but on other matters he was surprisingly open.

The evolution of compliance at Binance

“We want to be collaborative,” was the key point that Noah tried to enforce during his talk on the panel. He added how he wanted Binance’s relationship with regulators to move forward. He shared how it was no secret how the company have acknowledged publicly that when the company started, it didn’t always do everything to a particular standard. Today things are different.

“When the company started in 2017 there were a bunch of software engineers building a fantastic product and not necessarily following all the rules,” Noah explained.

“That’s not an excuse,” he added. “Rules and regulations are there for a purpose. However. If you look at traditional banks, they have their own remediation issues.” Referring to his own time in traditional finance, Noah highlighted how even banks with the most robust compliance programs don’t always get it right.

Noah explained how CZ and the leadership at Binance recognized a few years ago how important things like KYC and AML are. And how the company has now completely changed its approach to compliance.

“Just to give you some metrics, a year and half ago the compliance department at Binance was about 100 people,” Noah explained. “Today we stand at 750 worldwide. Many of them with vast experience in traditional finance. The company has spent about $80 million over the last few years to develop systems like KYC. So, increasingly, our program looks similar to what the traditional finance compliance programs look like.”

Binance in 2023

Noah went to considerable lengths to highlight how the Binance.US entity had nothing to do with Binance itself apart from the name. “We don’t operate in the U.S., and we haven’t had U.S. customers for some time,” Noah elaborated.

“Regulators need confidence,” Noah added. “All of the things that Sam BF (FTX) did were particularly devastating to the industry. They eroded confidence.” Sam told regulators that ‘we’re doing the right thing’, Noah continued. It’s no longer enough to explain what you do to a regulator now. Today you need to gain their trust, he shared.

“Whether its remediating issues that the CFTC highlighted, Binance and every other player has to not only be on the front foot, but has to demonstrate and show that we’re doing the right thing.”

Noah believes this is just one of the legacies of Sam BF that the industry has to deal with. Regulators feel burned for now and the market is harder.

Just look at Coinbase eyeing up an exit from the U.S. market. Not to mention the bankruptcy of part of the Bittrex platform today. Could the future of crypto and digital assets lie away from the U.S.? Could the Euro price be the leading price against bitcoin and not the dollar in the future?

There are a lot more questions about the future of digital assets. Questions that may not get answered at today’s summit. But it’s good to see the key stakeholders continuing to explore the ‘what’s next’ together.

Author: Andy Samu

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