Crypto exchange Binance says it’ll handle regulators better than Libra

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One of the world’s largest cryptocurrency exchanges said it has learned a valuable lesson from the push back on Facebook Inc.’s Libra and will take a different approach as it works on a rival project.

Malta-based crypto platform Binance is ready to engage with all regulators from day one as it prepares to roll out its Venus digital currencies. “If we want to launch Venus in a country, we’ll make sure it complies with the regulations,” the exchange’s co-founder He Yi said in an interview.

Binance announced last week it plans to seek partners to create so-called stable coins -- digital currencies that are pegged to traditional money and thus less volatile than cryptocurrencies like Bitcoin, which fluctuate based on market dynamics. In an interview detailing the project, He said Venus drew inspiration from Facebook’s Libra in many ways -- but that the resistance from governments around the world to the social-media behemoth’s plan served as a cautionary tale.

Facebook hopes its new currency will be used for everyday transactions across the globe after it goes live as soon as next year under the governance of a broad set of partners from Visa Inc. to Uber Technologies Inc. and Spotify Technology SA. But since the release of its whitepaper in June, Libra has drawn wide-ranging regulatory scrutiny. The European Union has started an antitrust investigation, U.S. officials from President Donald Trump to Federal Reserve Chairman Jerome Powell have questioned Libra and officials from places like India have expressed skepticism.

Binance also plans to form an independent association in charge of Venus, and use a basket of government-backed currencies and securities as its reserve. But He said the company will take a “more conservative” approach to push through the project, with a priority on regulatory compliance rather than technological developments.

Unlike Libra, Venus will focus on partnering with governments and companies in non-Western countries, He said. In a special shout-out to China, she called Venus a “Belt and Road version of Libra,” saying its geographic scope would roughly align with Beijing’s sprawling infrastructure initiative.

The emphasis on regulatory buy-in is yet another sign of Binance’s efforts to improve its relationship with governments. The crypto platform, established in 2017, has at times played a game of regulatory whac-a-mole -- for example, it quit markets including Japan and China to avoid clashes with local financial watchdogs. But more recently Binance has set up regulatory-compliant exchanges in friendlier jurisdictions like Singapore and Malta, allowing customers to trade using real money.

China, meanwhile, is planning to release its own cryptocurrency that would eventually replace cash in circulation and give Beijing even more control of its financial system. The country’s central bank, the People’s Bank of China, has already shut down local crypto exchanges.

“So far regulators around the world can’t gauge precisely the potential risks stable coins will bring to their financial systems, and that’s why they are very careful about Libra-like currencies,” said Hu Tao, founder of Beijing-based crytpo researcher TokenInsight. “In theory, Binance will face the same challenges as Facebook.”

In the Chinese statement announcing Venus, Binance advises governments to launch a regulatory sandbox, which, among other things, allows private firms to issue their own stable coins for payments and cross-border settlements. “It’s better to embrace the change rather than missing the opportunity,” according to the statement written by He.

Binance will likely create a new open-sourced blockchain for Venus, He says, rather than using its own Binance Chain, which already supports a range of stable coins. The exchange operator is willing to give up some commercial interests to attract more partners, she said, although the plan hasn’t been finalized yet.

He is leading a team of more than 10 people in compliance, business development and coding to work on the Venus project. There’s no time line yet for the launch, but she expects more details including partnerships to be released in the next few months.

A TV anchor-turned tech entrepreneur, He launched Binance with “CZ” Zhao Changpeng after leaving Chinese crypto exchange OKCoin, which the two co-founded. Previously she also served as a vice-president of marketing for Beijing-based Yixia Technology, which owns a slew of popular short video apps.

Bloomberg News
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