Binance.US may reduce CZ’s majority stake amid US regulatory scrutiny. The move comes amid concerns over the global crypto exchange industry’s regulatory crackdown.
Binance.US Executives in Talks with CZ
Binance.US executives are reportedly discussing with founder Changpeng Zhao, also known as CZ, about reducing his stake in the company to address concerns over regulatory compliance and bolster the exchange’s standing with US regulators. Since last summer, CZ has been trying to sell at least part of his stake in Binance.US to reduce perceived regulatory risk.
The senior management of Binance.US believes that reducing CZ’s ownership stake in the company would make US regulators view it more favorably, particularly in light of the ongoing crackdown on the crypto industry in the US. Binance.US is currently seeking regulatory approval in the US to expand its offerings, but the company’s association with CZ has raised questions about its ability to meet the necessary regulatory requirements.
In March, the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and CZ over allegedly operating an “illegal” digital asset exchange along with a “sham” compliance program. The lawsuit alleges that Binance and CZ engaged in “willful evasion” of US law while exploiting regulatory loopholes to gain a competitive advantage.
The regulatory scrutiny has put pressure on Binance.US to take action to distance itself from its founder and demonstrate its commitment to compliance. While discussions are ongoing, it is still being determined how much of CZ’s stake Binance.US intends to reduce or whether he will retain a controlling interest in the company. However, reducing CZ’s ownership stake in Binance.US is believed necessary to obtain the licenses to operate legally in the US.
This Move is Old News
Reportedly, Zhao has been trying to sell off part of his shares since the summer of last year, so this decrease in his control is not exactly a surprise. Nonetheless, efforts to weaken his grip have received fresh energy after the CFTC case and following regulatory hurdles.
As regulators increasingly scrutinize cryptocurrency exchanges, this step would put Binance.US in line with the industry practice of separating ownership and management.
US division executives reportedly worry that a lawsuit filed by the Commodity Futures Trading Commission (CFTC) against Zhao will make it more difficult for the company to win approval for specific licenses from US regulators.
Final Thoughts
By separating itself from Zhao’s contentious reputation, Binance hopes to calm authorities’ fears. This may allow Binance.US to better compete with other US exchanges and extend its offerings.