Following the crypto winter, Binance has emerged as a mainstay of the crypto industry. While competitors such as FTX collapsed — owing to poor fund management — Binance benefited from its prudent practices and focus on consumer protection.
The company is the largest crypto exchange by all metrics, processing over US$6 billion in daily trades at present — this is almost double that of its next closest competitor. It accounts for over half of the exchange market share, and is one of the few crypto companies to have continued hiring through the market crash.
Beyond this, Binance has helped bail out crypto companies affected by the winter, pledging US$2 billion in financial support last November. The company shoulders an immense responsibility today, with any shortcomings — security flaws, liquidity crises — sure to spell disaster for the wider industry.
Alex Chehade, Binance’s General Manager (GM) for the Middle East (MENA), is confident that the industry is in safe hands and Binance won’t be responsible for a crypto winter such as the one at present. “We are very conservative — we were the first to come out with proof of reserves.”
As is becoming common among crypto exchanges today, proof of reserves confirm the manner in which a company holds its customers’ assets. For example, Binance holds all user assets 1:1 and maintains additional reserves.
This provides assurance that users can withdraw their funds at any given time, says Chehade, adding that “there’s very little scope for failure in that manner.”
In search of home
Regulations have been a hot topic since the crypto winter and rightfully so. For the industry to mature, there’s a strong need for policymakers to step in and ensure that consumers are well-protected from bad actors.
For companies as well, regulations help establish clear boundaries within which they can operate. Although Binance CEO, Changpeng Zhao, takes pride in his company being headquarter-less, it still needs regional hubs which provide regulatory clarity.
In December 2021, Binance withdrew its application to be licensed in Singapore and struck a deal to work with Dubai’s regulators on policies. Since then, the Emirate seems to have become a preferred home for the company.
Dubai gave Binance an opportunity to put down a footprint here in the [UAE]. From the top down, the government has made statements and made a real push to enable the Web3 economy in the region. They’ve put out legislation for crypto licences and financial institutions earlier than the rest of the world. That’s what spurred the action in this region.– Alex Chehade, Binance’s GM for the Middle East (MENA)
For Binance, it was crucial to see a trajectory and long-term plan for the future of crypto. Dubai provided clarity in its regulations — enough to convince Binance to set up shop and house over 600 employees in the city.
The company has since acquired an MVP licence from Dubai’s Virtual Asset Regulatory Authority (VARA), which allows it to offer its services to qualified retail and institutional investors.
“We’ve worked with [VARA] to build regulations and now they have the FMP – full market participant – program which we hope to [become a part of] later in the year,” Chehade says. This will allow Binance to open its platform up to mass retail customers in Dubai as well.
Lessons from the crypto winter
To avoid a repeat of the crypto winter, Chehade believes it’s up to the regulators to ensure businesses are secure, transparent, and compliant.
What the UAE has done well is that they’ve given very clear guidance and regulations, and there’s no ambiguity around the authority that is licensing the company.– Alex Chehade, Binance’s GM for the Middle East (MENA)
Today, VARA in Dubai is the only independent body dedicated solely to the regulation of virtual assets and having such a set-up helps avoid grey areas in policymaking. “We need a consolidated view on the industry and its products,” says Chehade.
In other jurisdictions, it’s common for a number of different regulatory bodies to deal with crypto activities, which can result in needless complexity. “That’s the grey area that needs to be addressed,” he adds, laying down his hopes for the near future.
That said, there are positive signs that change is on its way. “With the collapses, regulators have reinvestigated their understanding about how [crypto] players work. It has spurred more conversations and we’re coming out of the winter in a much stronger fashion. There’s been a lot more deliberation and conversation between regulators and industry players.”
Returning to Singapore
Although Chehade admits that the Middle East has taken a front foot globally – as a result of which, Binance has been concentrated in Dubai – the company is still committed to working with the Monetary Authority of Singapore (MAS) on a possible return to the city-state.
When Binance initially withdrew its licence application, there was a lack of clarity on the future of crypto in Singapore. However, the past year has led to some key developments.
As the MAS has produced and released more information about their regulations, we’ve engaged with them more. We need to work closely with the regulators and it needs to be clear and distinct.
Most recently, [the MAS] published proposals enhancing consumer protections, and we were involved in correspondence.– Alex Chehade, Binance’s GM for the Middle East (MENA)
Following the FTX collapse, Binance’s CEO published six principles – emphasising user protection – which he believes are essential for all centralised exchanges. With this being a key part of Binance’s philosophy, Chehade says that they are glad to engage with MAS on the matter.
As it stands, Binance is actively pursuing a licence in Singapore via its custodial arm, Ceffu. “We’re working forward to establish an institutionally focused custodian in Singapore,” Chehade says.
Featured Image Credit: Binance / Gulf Insider