Binance EndofYear Report 2023 Committing 200 Million Yuan to Compliance Collaborating with Regulatory Authorities to Ensure Ecological Safety

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Core Issues of 2023: Security and Compliance
Binance Invests $200 Million in Compliance for 2023
Embracing Compliance, Creating the Future of the Industry
A New Year, A New Binance
In the blink of an eye, another year has passed. Looking back at the industry environment of the past year, due to a series of black swan events involving crypto companies such as FTX, Celsius, and 3AC since 2022, last year became the “regulatory year” for the cryptocurrency market, with regulatory authorities around the world tightening legal norms for related crypto companies. As a result, the operations of related entities globally faced severe regulatory challenges.
In particular, under the leadership of Gary Gensler, the U.S. Securities and Exchange Commission (SEC) took strong enforcement actions against exchanges and crypto service providers including Kraken and Coinbase throughout the year, in the absence of clear regulatory norms in the United States. In this environment, crypto entities aiming for long-term operations must invest heavily in compliance to cope with the tightening global regulatory trends. The content presented in Binance Exchange’s recent “Year-End Report 2023” reflects this long-term strategic planning and action.
According to the report, investment in compliance continues to be one of the core focuses for Binance Exchange in 2023. Over the past year, the funds allocated by Binance for compliance have increased significantly from $158 million in 2022 to $213 million in 2023, a growth of 35%.
We speculate that these increased compliance budgets are mainly invested in several aspects:
Impact of Compliance Trends
As the global cryptocurrency market continues to grow, governments and regulatory bodies worldwide are strengthening their supervision of cryptocurrency exchanges. This trend continued to intensify in 2023 and is likely to extend into 2024. Therefore, as a global exchange, Binance must actively respond to evolving compliance requirements to ensure continuous business operations and meet regulatory demands. Increasing compliance budgets can be seen as a strategic measure to avoid potential legal risks and enhance their competitive advantage in the business.
Optimization of KYC/AML Processes
In terms of compliance, KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures are crucial for a financial institution’s legal compliance. Through continuous optimization processes, it is expected that Binance will ensure higher security and efficiency. This may include more levels of identity verification, real-time transaction monitoring, and risk assessment to ensure that the exchange blocks any illicit activities and safeguards the platform from being used for illegal purposes.
Enhancing Market Transparency
In the compliance process, Binance may seek to increase market transparency to build higher trust. This can be achieved through publicly reporting compliance, transparency of transaction data, and active cooperation with regulatory authorities. These measures help attract more institutional investors and large enterprises, further driving market maturity in the cryptocurrency market and promoting more potential collaborations and innovations.
Strengthening Information Security
As the business scope expands, Binance has also invested significant resources in building security measures for its platform to maintain a secure environment for user digital assets and data. Currently, Binance has obtained ISO 27001 and ISO 27701 certifications for information security governance and privacy information management in four jurisdictions: France, the United Arab Emirates, Bahrain, and Turkey. It has also completed an audit by the external audit firm A-LIGN for SOC 2® Type II. A-LIGN, a technology-oriented security and compliance management partner, helps reduce cybersecurity risks and is trusted by over 4,000 global organizations.
International Cooperation
Compliance is not only carried out at the national level but also requires global collaboration. By actively participating and deepening cooperation with regulatory authorities worldwide, Binance can leverage its industry influence to assist in the positive development of the crypto industry. This includes collaborating with other crypto companies, financial institutions, and government agencies to jointly establish industry standards and deepen cooperation with law enforcement agencies to combat financial crimes.
In conclusion, Binance’s initiative to increase compliance budgets in 2023 is wise and helps ensure the sustainability and compliance of its business. As the cryptocurrency market continues to evolve and regulatory environments change, compliance will remain a key focus in the industry, requiring continuous resource investment to address challenges and opportunities.
On the other hand, compliance is crucial for establishing trust between industries, regulatory bodies, and customers, maintaining high compliance standards not only aids in expanding global businesses but also becomes a competitive advantage for crypto entities. Taking Binance as an example, the exchange obtained operational licenses, registrations, and authorizations in 18 jurisdictions globally in 2023, including G7 countries such as France, Italy, and Japan, achieving the highest number of licenses in history, which undoubtedly is the key to gaining user trust for Binance.
Binance’s global operational licenses and registrations enable it to expand into different jurisdictions, not only expanding its user base but also reducing geographical risks. This also helps diversify business by providing various products and services according to regional needs and complying with local regulatory requirements. This global presence helps Binance maintain its market leadership position.
Having the highest number of licenses signifies Binance’s competitive advantage in the market, enabling it to offer a wider range of services, attracting more institutional investors and retail users.
Furthermore, by the end of 2023, Binance’s compliance team responded to a total of 58,000 enforcement requests and uncovered billions of dollars in illegal funds during the process. Imagine, this number equates to responding to over 150 enforcement requests per day. Binance’s compliance team handles multiple requests from regulatory and law enforcement agencies daily to assist in investigating potential illegal activities, and such achievements demonstrate the effectiveness and influence of Binance’s compliance team.
In terms of billions of dollars in illegal funds, this number not only represents Binance’s crucial participation in combating financial crimes globally but also demonstrates Binance’s commitment to protecting users, contributing to the security of the crypto asset ecosystem, serving as a prime example.
At the same time, Binance even collaborated with law enforcement agencies in Taiwan, Hong Kong, South Korea, Australia, and other locations, providing up to 120 educational training sessions for global law enforcement officers. This international cooperation and knowledge sharing help combat cross-border financial crimes and enhance the security of the global financial system. For example, in 2023, Binance collaborated with the Criminal Investigation Bureau, High Prosecutors Office, and multiple local prosecutors’ offices in Taiwan to organize a series of educational training activities.
During the events, the Binance team shared the latest trends in crypto assets and investigation techniques, helping over a hundred Taiwanese law enforcement officers enhance their understanding of crypto assets and strengthen their investigation skills.
More of such international cooperation not only provides professional knowledge for law enforcement officers but also promotes in-depth communication between the public and private sectors, setting a good example for the industry, while also combating illicit activities related to cryptocurrencies, benefiting the long-term development of the entire crypto ecosystem.
Binance actively launched several new products and services in 2023, including copy trading functions and Web3 wallets, to drive innovation in the industry. These initiatives undoubtedly injected new vitality into the cryptocurrency industry, showcasing Binance’s profound understanding of technological advancements and user needs.
However, from the above content, it is clear that even while pursuing innovation, Binance still places “compliance” at the core of its business development. This insistence not only reflects Binance’s long-term strategic planning for global business development but also embodies its continuous commitment to ensuring the security, compliance, and transparency of the cryptocurrency ecosystem.
Looking back at the overall changes in the cryptocurrency market in 2023, various exchanges including Binance experienced significant challenges. However, ultimately, Binance reached settlement agreements with U.S. regulatory authorities, taking responsibility for past actions, and reemerged stronger. With the experienced Richard Teng taking over as CEO, we can expect to see a different Binance than before. As Richard stated in his year-end open letter: