In just eight months, the founder of Binance turned into a prosperous trading platform for digital assets. The company’s annual profit was $ 200 million, and the founder made a fortune of $ 2 billion – according to his own estimate – and was on the cover of Forbes magazine.
It is curious that his company does not fit into the generally accepted framework – the exchange does not have a bank account and address. However, now the 41-year-old businessman and the programmer in the past faces unpleasant tendencies, which threaten not only him, but the entire business of crypto-exchange exchanges.
In February, Zhao abandoned the plan to establish a headquarters in Japan – after requests from the state regulator, he was instructed to stop working in the country without a license. It is also reported that the Commission on Securities and Futures of Hong Kong in recent months issued warnings against Binance and several of the Exchange’s competitors, ordering them to refrain from trading crypto-currencies that qualify as securities.
But not everything is so radiant.
Binance Exchange, which allows users from almost anywhere in the world to trade with Crypto currency (several hundred trading pairs are available) has qualities that disturb regulators the most.
First, there is very superficial identification of customers – to open an account with a limit for a daily withdrawal of funds in two bitcoins (now it is $ 15,782) you only need an email address. It is clear that this level of anonymity does not allow you to control money laundering or market manipulation. In addition, Binance supports the ICO, through which the block-start-ups attract funding, which is also a concern for government departments.
Marketing tactics Binance also surprises many – and free Lamborghini as a prize in the competition, and the referral program, which, according to Lex Sokolin, a partner of the London-based Autonomous Research LLP, essentially turns the Exchange users into unlicensed securities brokers.
Zhao hides the offices and servers of Binance, which makes it difficult to determine the jurisdiction to which the company belongs, and asks employees not to disclose their place of work. He says he does not sit in one place, wandering around the rented apartments and hotels of Singapore, Taiwan and Hong Kong (he prefers Mandarin Oriental and Ritz-Carlton networks).
It also keeps Binance isolated from the traditional financial system, and, accordingly, from its rules – the exchange serves only transactions between the crypto-currencies, that is, customers can change one token to another, but not to dollars or euros. When you need to transfer money to other sellers or employees, Binance uses the intermediation of other exchanges. Despite inquiries from Bloomberg, Zhao refused to provide proof of the size of his fortune, to tell about the location of the office or to share financial reports of the company. According to the website of Coinmarketcap.com, in terms of turnover, the stock exchange ranks first in the world, but it has no external audit.