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Key Takeaways:
Regulatory pressure: French regulators have been intensely scrutinising Binance France, with investigations citing allegations of aggravated money laundering, among other charges. This regulatory pressure has significantly impacted the company’s operations and leadership decisions.
Leadership changes: Stéphanie Cabossioras, the Executive Director of Binance France, resigned amid this regulatory turmoil. Her departure is part of a broader trend of high-level executive exits from Binance globally, raising concerns about the exchange’s stability and future direction.
Operational Iimpact: Despite these challenges and the leadership changes, Binance has stated that its French operations will continue. However, the ongoing regulatory scrutiny and executive departures will likely have a lasting impact on the company’s strategy and market presence in France and beyond.
The French arm of the global cryptocurrency exchange Binance has undergone a significant ownership change following a warning from France’s financial market regulator, the Autorité des Marchés Financiers (AMF).
According to a blog post, the AMF notified Binance France that it needed to address issues stemming from conflicts involving the original beneficial owner and the United States (US) Justice Department, Commodity Futures Trading Commission (CFTC) and the Treasury’s Financial Crimes Enforcement Network. This meant that former Binance CEO Changpeng Zhao (CZ) could no longer own the company. The post mentioned that CZ had already left the company. He admitted to the US charges in November and received a four-month prison sentence in the US, though he has not yet started serving his term. This regulatory scrutiny has highlighted the increasing pressure on crypto exchanges to comply with local financial regulations and ensure the integrity of their operations.
Regulatory Pressure and Background
Binance, one of the world’s largest crypto exchanges, has faced regulatory challenges across various jurisdictions. In France, the AMF has been particularly vigilant about ensuring crypto exchanges adhere to strict regulatory standards to protect investors and maintain market stability. The warning issued to Binance France cited several compliance issues, including the need for improved anti-money laundering (AML) measures, enhanced transparency, and stricter adherence to Know Your Customer (KYC) protocols.
The AMF’s concerns were not unique to Binance France. Globally, Binance has been scrutinised by regulators in several countries, including the US, the United Kingdom (UK), Japan, and Germany. These regulatory bodies have raised similar issues, emphasising the need for crypto exchanges to operate within the legal frameworks of their respective countries. In response to these pressures, Binance has tried to enhance its compliance measures, but the AMF’s warning signalled that more robust changes were necessary for Binance France.
Ownership Change and Strategic Response
In response to the AMF’s warning, Binance France has undertaken a strategic ownership change to address the regulatory concerns and demonstrate its commitment to compliance. The new ownership structure involves a consortium of French investors and financial institutions, bringing in local expertise and regulatory familiarity. This shift is expected to bolster Binance France’s standing with the AMF and facilitate smoother operations within the French regulatory environment. The new ownership group includes prominent figures from the French financial sector, who are expected to bring experience and credibility to the exchange.
Binance France did not disclose the new beneficiaries’ names but mentioned that both are members of Binance’s founding team. According to the Pappers information service, these individuals are Lihua He and Yulong Yan, about whom little information is available. The Binance white paper likely refers to Allan Yan as Yan, the first product director. Yan also co-founded Bijie Tech with Zhao, a Shanghai-based company that offered software solutions to crypto exchanges but closed down in 2017. Lihua He is not mentioned in the document. CZ, former CEO of Binance, expressed optimism about the new ownership structure, which reflects Binance’s dedication to working collaboratively with regulators and adhering to local laws. He emphasised that Binance remains committed to providing secure and reliable crypto services while ensuring full regulatory compliance.
Implication for the Cryptocurrency Market in France
The ownership change at Binance France will likely have several implications for the broader crypto market in France. First and foremost, it sets a precedent for other crypto exchanges operating in the country. As regulators continue tightening their industry oversight, exchanges must adopt similar measures to ensure compliance and avoid regulatory penalties. The involvement of local investors and financial institutions in Binance France’s ownership structure could increase French investors’ confidence in the crypto market. With greater regulatory alignment and enhanced compliance measures, investors may feel more secure participating in the crypto ecosystem, potentially driving higher adoption rates and market growth.
This development may prompt other global crypto exchanges to reevaluate their operations and compliance strategies in France and other regulated markets. The need for local expertise and adherence to stringent regulatory standards is becoming increasingly apparent, and exchanges that proactively address these challenges will be better positioned for long-term success in Binance France. They encountered difficulties securing a banking partner in France following the CFTC’s lawsuit against the company in 2023. In June, Binance was refused a virtual asset service provider licence in the Netherlands, and later that month, regulators shut down its operations in Belgium.