Major crypto exchange Binance took a compliance-friendly approach to its business after years of cat-and-mouse game with regulators around the world and it worked surprisingly well in terms of user retention, according to a new interview with Binance CEO Changpeng Zhao.
Speaking to Bloomberg News, CZ noted that Binance made Know Your Customer (KYC) processes mandatory “for global users, for every feature” in a bid to attract new users as a regulatory-compliant business. He revealed that Binance lost about 3% of the users after making KYC obligatory.
Binance didn’t immediately respond to Cointelegraph’s request for confirmation.
KYC is a common practice used by crypto exchanges and traditional financial institutions. It enables companies to verify a user’s authenticity by requesting some form of real-world identification. Binance made KYC an obligation for all of its existing and new users on Aug. 20 to access its products and services like cryptocurrency deposits, trades and withdrawals.
“We feel that being compliant will allow more users to use us,” CZ said, adding that most people do feel more comfortable using a licensed exchange.
Binance touted its decentralized, no-physical-headquarters structure for years until CZ announced in July that the crypto exchange is ready to work with local regulators by saying, “We want to be licensed everywhere. From now on, we’re going to be a financial institution.”
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In his interview, CZ said that, while regulators were initially skeptical about Binance, their attitudes have changed as the communications continued. “When people see me in person, they say, ‘look, CZ is very reasonable, very calm, not a crazy guy.’ So that helps establish their trust much faster,” he added.
Binance recently established three subsidiaries in Ireland as part of CZ’s vision to set up formal headquarters in different regions worldwide. “When we first started we wanted to embrace the decentralized principles, no headquarters, work all around the world, no borders”, CZ then said, adding that “It’s very clear now to run a centralized exchange, you need a centralized, legal entity structure behind it.”