El Salvador President Nayib Bukele took a victory lap on Monday after the Bank of England’s British pound rapidly depreciated against the dollar. The institution has since resumed quantitative easing. Its action marks a clear pivot that many in the Bitcoin community predicted central banks would be forced into months in advance. Bukele’s Callout Bukele tagged the Bank of England with a triumphant “Told you,” over Twitter, scoring over 14,000 like and 2000 retweets from his followers. His brief comment…
Binance exchange CEO Changpeng Zhao admits to adopting a centralized platform. Working under a centralized crypto exchange paves the way to peaceful coexistence with the regulators. By Zhao’s words, Binance needs a clear record of stakeholders, risk controls, and ownership. The news comes after continuous battles with financial regulators from different countries.
The Previous Struggles
Binance had several regulatory fights in the past. Essentially, concerns came from regulators based in Italy, Singapore, Holland, Japan, and many more. In June 2021, Japan issued a warning saying that the exchange was operating illegally.
The Financial Service Agency made it clear that Binance didn’t go through any regulatory procedures. Singapore’s case was almost similar as it said that the exchange is working as a non-licensed entity. Subsequently, Zhao stood firm on using the decentralization method, claiming that there was no headquarters. Italy also claims that the platform is offering trading services without authorization.
Such comments limit the platform from performing over regulatory concerns. Thus, the remarks of regulators made Changpeng Zhao consider building a centralized ecosystem.
Possible Outcome of Centralization
Binance plays a crucial role in the crypto industry. At press time, the crypto exchange performs transactions worth more than $26 billion daily. Being a large trading platform, Binance believes it needs to be on the right side of the law. Adopting a centralized system could change a lot of functionalities within Binance.
Firstly, the exchange may lose the privileges of maintaining privacy. It means that the government is going to know the traders’ identities and profiles. Disclosing such information could lead to impersonation and identity theft cases. Registering with the government may also make it difficult to access financial services. Traders who need to transact must qualify for the benefits as per the government’s guidelines.
Centralization limits the control of a user’s digital assets. Traders may have to prepare to entrust their private key details with the exchange. Moreover, maintaining the customer’s assets attracts cyber-related activities such as hacking. As such, it threatens the security of a user’s assets.
As an advantage, Binance can expect a rise in liquidity levels. Possessing higher liquidity allows Binance to perform every order in a fast manner. Moreover, many nations hope to end the issue of money laundering in their systems. Once Binance applies for legal registration, the government can monitor for any suspicious activity through the exchange.
Hence, looking into the user’s trades enables the authorities to fight against laundering activities. Additional features such as KYC may also be applicable after moving to centralization. In KYC procedures, the regulators can establish the origin of a trader’s funds.