Binance CEO Changpeng Zhao has revealed that regulatory requirements were the reason behind the company’s withdrawal from the Canadian market. Binance announced on May 12 that it would be “proactively withdrawing from the Canadian marketplace” due to new crypto exchange regulatory guidance on stablecoins and investor limits. In an AMA Twitter Spaces, CZ gave a more detailed explanation, saying there was a lot of pressure on regulators to enforce a strict regime following the Quadriga CX and FTX scandals.
Regulatory Pressure
Quadriga CX CEO founder Gerald Cotten fell ill and died under mysterious circumstances in India in December 2018. Initially, it was understood that only Cotten had access to the company’s keys, but investigations later revealed corporate mismanagement and missing user funds. FTX filed for bankruptcy on November 11 after a run on the exchange. Incoming CEO John Ray described a catalog of corporate failures and unacceptable practices.
CZ stated that regulators wanted Binance to put C$100 million ($73.5 million) in third-party escrow. This requirement related to regulators sticking to their guns on the collateral being escrowed with a non-Binance provider, which was unacceptable for the company. CZ also mentioned a requirement to limit the number of tokens Binance offered Canadian customers.
Withdrawal from Canadian Market
Binance put off the decision to leave the Canadian market as long as possible to explore other reasonable avenues to protect its Canadian users. However, it became apparent that there were none. The regulatory requirements meant it was no longer tenable to continue operating in the country. The firm concluded that the Canadian market did not offer a viable business as meeting the regulatory requirements would mean operating a more customized and expensive model.
Binance’s own custodian service was viewed as more secure than third-party custodian technology providers, which are smaller and less tested. The sticking point related to regulators wanting the collateral to be escrowed with a non-Binance provider. Binance believed this was a higher risk, not less risk.
CZ expressed hope that Canada would turn back in a couple of years, citing regulatory experiences in Japan and Thailand, which have opened up considerably recently after previously being hostile.
Regulatory requirements were the reason behind Binance’s withdrawal from the Canadian market. The company believed that the requirements made it unfeasible to continue operating in the country. Binance put off the decision to leave the market as long as possible to explore other avenues to protect its Canadian users. The firm concluded that the Canadian market did not offer a viable business as meeting the regulatory requirements would mean operating a more customized and expensive model.
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