Binance, the poster boy of crypto nomadism returns to form and does what it does best.
by Edmund Yong
“O Binance, Binance wherefore art thou? Deny thy Malta and refuse thy place. What’s in a place? That which we call Binance by any other place would smell as sweet.”
Romeo and Juliet (paraphrased)
The (Tall) Tale of Two Tweets
Almost exactly two years ago, Binance announced to the world that it has found a new home in Malta, a deeply Catholic island in the sun with more nuns than prostitutes. Its Prime Minister rolled out the welcome mat in a tweet and the world thought better.
Then last week we learnt that this was an unholy union from the start. CZ, the hallowed initials of Binance wunderkind and crypto royalty, tweeted that it does not operate in Malta and “this has always been the case”. Fake news alert: They never walked down the aisle! But fact checkers quickly dug out Binance’s own past media release to remind it so.
If you’re not caught up, here are the receipts:
- On Feb 21, 2020, the Malta Financial Services Authority (MFSA) issued a public statement: “MFSA reiterates that Binance is not authorised by the MFSA to operate in the crypto currency sphere and is therefore not subject to regulatory oversight by the MFSA.”
- To which CZ replied on the same day: “Binance.com is not headquartered or operated in Malta. Office and HQ are old concepts like SMS and MMS. Time is moving on. There are misconceptions some people have on how the world must work a certain way, you must have offices, HQ, etc. But there is a new world with blockchain now.”
Oops. We were all gaslighted. Go home everyone.
Being Nowhere but Everywhere
Except wait… where’s ‘home’ for Binance? If Binance is not in Malta, is it homeless then? Breaking up is hard to do in a Valentine month; but being thrown out of the house – that’s something else. Though it’s not the first time. Binance was sent packing before in China and Japan due to crackdowns.
You must understand, crypto exchanges wear their refugee cards like a badge of honor. Binance is not homeless, it is ubiquitous! Malta is still its “spiritual” home, Binance claims, like an import of the Catholic notion of the Holy Spirit. They are not ‘internally displaced persons’ in the refugee sense of the word, but ‘intentionally (self) displaced platforms’. Crypto nomadism is a higher form of corporate citizenry; it’s a response to the higher calling of decentralization. (The hairs on my hand stiffen because I can’t believe I’m writing this sh*t.)
- As @cz_binance explains: “com has always operated in a decentralized manner as we reach out to our users across more than 180 nations worldwide. As well as pushing the envelope in experimenting how to become a true DAO (decentralized autonomous organization).”
At this point, I’m going to do the meta “told-you-so” thing and refer back to some of our past articles. For all its tech benefits, decentralization is also a euphemism for regulatory stealth. It’s true that if crypto is a “global common market” then jurisdictional licensing may seem silly since regulators cannot regulate the unregulatable. It comes down to a balance of perception. Like when you go to a street of restaurants with food safety certifications, the one that isn’t certified will stick out. But there are plenty of consumers who won’t mind if the food’s really that great.
There is quite matter-of-factly nowhere worth hiding. Mass market adoption is not going to come from the islands. With MLD5 taking a tougher stand than FATF, even self-christened safe havens in the EU like Malta have to toe the line. And under MiFID II, tokens that are financial instruments aren’t allowed to be traded on exchanges. The shadowy space between regulated and unregulated is a mirage – the test for market attractiveness is when opportunities outweigh the cost of compliance.
Back to Malta. It had allowed crypto exchanges to roam there until 2020, during which AML laws were not strictly enforced, along with a “cash for passport” program. Thanks to the great page-turning reporting from Decrypt (which reads like a John le Carré novel), we learnt that an investigative journalist on the above was murdered by a car bomb. Another journo exposed that Binance had in actual fact no physical presence there and was “but a ghost… its 2018 financial records contained no transactions, no trades, and no tax paid”. The chain of events allegedly led to the downfall of Malta’s Prime Minister, whom CZ had personally thanked on Twitter back in the day.
See You at the Zoo… or Nature Park
Deloitte offered a most interesting solution to all this. The current “zoo model” with “small pockets of DLT jungles ring-fenced in legacy environments,” does not work. If you put them in cages for observation, they will be forced to scatter. Instead a “nature park” model where the “richness of DLT wildlife, hemmed in by a strong regulatory framework” is more suited. Imagine a new bio-diverse habitat for crypto-financial firms underpinned by strong rules.
For fun’s sake, let’s start inducting some animals, shall we?
How about “Hydra” for Binance: when one base is cut off, more bases will spring up – from Cayman to Singapore, Bermuda to Uganda. The opposite of this is the “Hippo”, large indigenous exchanges that dominate their home base but can’t grow big anywhere else. Then we have the nocturnal “Hedgehog”, those that operate both lit and dark venues – mostly the latter, which makes them appear less invasive and more invisible than the first two. Sounds like Huobi?
The next question is, where on earth will this nature park be.
Disclaimer: Please refer to source links. Opinions expressed in this article are the author’s own.