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- Binance unveiled a series of measures it's going to take to become what it says is a fully compliant institution.
- The company has run into regulatory trouble in the UK, US, Japan, Canada, Italy, Germany, Thailand and Cayman Islands.
- A tax advisor and an economist spoke about how regulation is going to be an integral part of crypto trading.
Binance, the world's largest crypto exchange, is intent on cleaning up its compliance image, but it will take more than a few nods to the regulators to resolve the numerous bans and restrictions that it currently faces.
The company is going to have to totally overhaul its business model and, what's more, anyone trading cryptocurrencies is going to have to get on board with the idea that, without tighter controls, their "HODLing" days may be numbered, according to two tax and financial experts.
Binance held a press conference this week at which it said it strives to be a fully compliant institution.
"Our goal is to help increase the freedom of money, all around the world, without sacrificing security and compliance," CEO Changpeng Zhao said.
The company is under investigation by US regulators, tax and justice authorities. It's facing bans in the UK, Italy and Ontario – Canada's most populous province. It's received warnings from regulators in Japan, Germany and the Cayman Islands, among others.
To start, Binance said it would share some user data with local regulators and limit daily withdrawals to $2,000, from two bitcoins, currently worth around $66,000.
"They don't have to do the minimum, they've got to do the maximum anticipated, they've got to basically change their business model significantly," David Lesperance, who is managing director of Lesperance and Associates, a immigration, citizenship and tax advising firm, told Insider.
One of the attractions of cryptocurrencies is their anonymity.
Lesperance said he started getting calls around a year ago from individual retail traders up to ultra-wealthy family offices.
"The situation is people bought into this early thing of 'oh, it's the perfect tax haven. They'll never find me.' Well of course, all the taxing authorities said, 'oh, there's a little bit of, literally, treasure," he said.
This week, Binance said it would roll out a tool to help customers track their tax exposure.
"What [Binance] have to do is really emphasize and say 'okay, you don't want us to be in a regulatory environment, We don't want you as a client, so bury [your crypto] under your mother's garden, and best of luck to you,'" Lesperance said.
The crypto exchange has until now had decentralized operations, meaning it doesn't have headquarters of any sort
The second in the company's two-pronged approach to handling increased scrutiny from regulators, was to add headquarters around the world and work towards being licenced everywhere.
This was always going to be a tall order, according to Lex Sokolin, who is global fintech co-head and head economist at ConsenSys, a blockchain company.
"To be fair to them. It's not always clear what licences they would have had to have gotten and where," Sokolin told Insider. "Every single regulator wants a piece of everything without knowing what it is that they want to do with it."
"Regulators are concerned primarily with consumer protection, so, with having funds frozen or having money laundered, or having the wrong types of customers allowed to have the wrong types of accounts. And what constitutes the wrong type of account or exposure, depends on where you live and who the regulator is," he added.
To this end, Binance recently appointed Samuel Lim, who has over 10 years of experience in compliance in investment banking, as chief compliance officer and Jonathan Farnell, with over 20 years of experience in the UK financial and payments sector, as director of compliance.
In Europe at least, there a more cohesive regulatory approach, with the proposed Regulation on Markets in Crypto Assets (MiCA), Farnell said.
"It will give a lot more clarity to local regulators to consumers, and also to crypto operators like ourselves," Farnell said at the press conference.