Crypto Bosses Say The Tide Is Turning On Regulation

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Changpeng Zhao, founder and CEO of Binance, speaks at the Blockchain Week summit in Paris, France, on April 13, 2022.

Benjamin Girette | Bloomberg | Getty Images

PARIS – The crypto world may have turned a corner when it comes to regulation.

The bosses of several major crypto firms said CNBC’s regulators are starting to take a more positive approach to digital currencies, following a host of crackdowns on the space.

While China has outright banned crypto, countries like the US and Britain have announced steps to bring regulatory oversight to the nascent market.

“The tide is definitely turning,” Changpeng “CZ” Zhao, CEO of Binance, the world’s largest crypto exchange, told CNBC on the sidelines of the Paris Blockchain Week Summit.

Last year, UK regulators banned Binance from conducting regulated activities in the country, while in Singapore, Binance restricted its services after the central bank warned it might violate local regulations.

In a speech kicking off the event on Wednesday, Zhao said discussions about crypto regulations have shifted from “negative” to “positive.”

Before Zhao was introduced, the MC for the event referred to the crypto slang term “wagmi”, which stands for “we’re all going to make it through”.

“To be honest, I feel like we made it a little bit,” he said, adding that crypto is a lifeline for some in Ukraine during the Russian invasion.

But the crypto world still has a long way to go before it achieves widespread adoption. And the fate of the industry largely depends on the approaches that will be taken by various global regulators.

Governments taking action

“The regulatory landscape around the world is rapidly accelerating,” Nicolas Cary, co-founder of crypto wallet maker Blockchain.com, told CNBC.

The UK government announced last week that it would bring stablecoins – digital assets that track the prices of existing currencies such as the US dollar – into the local payment regime.

British Chancellor of the Exchequer Rishi Sunak has also asked the Royal Mint, which is responsible for the production of the country’s coins, to create a non-fungible token, or NFT, the crypto world’s answer to rare collectibles.

“The UK could be a dark horse in this whole situation,” Cary told CNBC.

“After Brexit, they have to make some kind of policy decision and make a strategic decision,” he added. “Are they renovating Brussels in London, or are they becoming the Singapore of the West, inviting all this innovation, all this technology and all this wealth generation and really owning the future of the web?”

Governments want to drive innovation around financial markets and the next possible generation of the Internet, known as “Web3,” crypto executives told CNBC.

But they are also wary of the dark side of the industry, which includes money laundering and other illegal transactions, and the environmental impact of energy-intensive bitcoin mining.

In the US, President Joe Biden recently signed an executive order urging government-wide coordination of digital assets. A major concern for Western regulators, industry insiders say, is the use of digital assets to evade Russian sanctions.

“I think they’re starting to take it seriously [but] I don’t think they get a warm and fuzzy feeling about it,” Arthur Breitman, co-founder of Tezos, a blockchain protocol that rivals Ethereum, told CNBC.

“Of course they will have a conservative bias,” Breitman said. However, only a “small portion” of crypto payments are related to criminal activity, he added.

Illegal activity accounted for less than 0.2% of digital currency transactions in 2021, according to data from blockchain analytics firm Chainalysis.

Charm offensive

France is “very progressive and very welcoming to cryptocurrencies,” Binance’s Zhao told CNBC. “They are much more advanced in their understanding.”

Putting the charm in Paris this week, Binance announced a “Web3 and crypto” start-up accelerator program in partnership with business incubator Station F.

It’s because the company, which previously boasted that it had no official headquarters, is now on the hunt for global headquarters.

“We will definitely have our regional headquarters for Europe in Paris,” said Zhao. “We will first establish some regional headquarters before going global.”

Binance now has licenses in Bahrain and Dubai and preliminary approval in Abu Dhabi. In Europe, it is overseen by Lithuanian anti-money laundering regulators and is seeking registration with the Swedish financial services watchdog.

The US behind?

According to Brad Garlinghouse, CEO of blockchain company Ripple, not all regulators agree with the rapid growth of crypto.

The U.S. Securities and Exchange Commission has sued Ripple, Garlinghouse and co-founder Chris Larsen over allegations that they illegally sold more than $1 billion worth of cryptocurrency XRP.

The SEC argues that XRP should be considered a security, a claim that Ripple disputes.

“When I give advice to entrepreneurs who are thinking about building a crypto or blockchain company, I say don’t incorporate it in the United States,” Garlinghouse said. “The lack of clarity and lack of certainty means you are at risk of the exact kind of lawsuit the SEC has filed against us.”

Ripple is even considering moving its headquarters abroad, with London and Singapore as potential candidates.

“Ripple will hire north of 300 people this year, and more than half of them will be outside the United States,” Garlinghouse said.



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