Binance, a popular cryptocurrency exchange, recently announced its decision to withdraw from the Canadian market. Changpeng Zhao, the CEO of Binance (also known as CZ), explained that the regulatory requirements in Canada made it unfeasible to continue operating in the country. The exchange cited new regulatory guidance on stablecoins and investor limits as the reasons behind its withdrawal. Binance stated that negotiations with authorities had failed to reach a middle ground, leading to the decision to withdraw.
Pressure on Regulators Following Scandals
During an AMA Twitter Spaces session, CZ provided more details on what led to the withdrawal. He stated that there was a lot of pressure on regulators to enforce a strict regime following the Quadriga CX and FTX scandals. In 2018, Quadriga CX CEO founder Gerald Cotten died under mysterious circumstances in India, and investigations later revealed corporate mismanagement and missing user funds. More recently, FTX filed for bankruptcy after a run on the exchange, leading to revelations of corporate failures and unacceptable practices.
Regulatory Requirements for Binance
CZ explained that regulators wanted Binance to put C$100 million ($73.5 million) in third-party escrow, and the collateral had to be escrowed with a non-Binance provider. According to CZ, this requirement was unacceptable for the company since third-party custodian technology providers are smaller and less tested than Binance. The regulators also limited the number of tokens Binance could offer Canadian customers. After analyzing the situation, Binance concluded that the Canadian market did not offer a viable business opportunity as meeting the regulatory requirements would mean operating a more customized and expensive model.
Hopes for the Future
Despite the withdrawal, CZ expressed hope that Canada would open up to cryptocurrency exchanges in the future. He cited regulatory experiences in Japan and Thailand, which have opened up considerably recently after previously being hostile. CZ said that the company put off the decision to withdraw as long as possible to explore other reasonable avenues to protect Canadian users, but it became apparent that there were none.
Binance’s withdrawal from the Canadian market was due to the regulatory requirements that made it unfeasible for the company to continue operating in the country. Regulatory pressure following the Quadriga CX and FTX scandals made it difficult to reach a middle ground with authorities. Binance hopes that Canada will turn back in a couple of years and open up to cryptocurrency exchanges like Japan and Thailand.