CZ to cut dominant stake in Binance.US
In response to the increased regulatory scrutiny from US authorities, Binance.US and its founder Changpeng Zhao are reportedly looking at ways to decrease CZ’s ownership stake in the company.
Sources familiar with the matter told The Information that the American outpost of the world’s biggest crypto exchange has been actively exploring strategies to reduce Zhao’s dominant stake since last summer. This move, which was discussed even before the CFTC lawsuit, is seen as an attempt to improve the company’s reputation and standing with US regulators.
Executives at Binance.US are reportedly worried that their ability to obtain additional regulatory licenses and scale the business in the US may be impeded if CZ retains his majority stake. This concern was expressed in light of the ongoing regulatory scrutiny and Zhao’s connection to the parent company, which has been accused of operating illegally in the US.
In mid-2022, Binance.US was reportedly looking to extend its seed round with a follow-on fundraise of up to $50 million after the exchange raised about $200 million at a pre-money valuation of $4.5 billion. While it has seen greater trading volumes than other rivals in the US, Binance.US still trails far behind Coinbase.
In 2021, CZ said that depending on business growth, Binance.US is eyeing a potential IPO route to go public within three years. At the time, CZ added that Coinbase, which became the first crypto exchange to go public, helped set up a playbook for crypto firms to do IPOs.
Meanwhile, Binance is facing a new probe by the US authorities over its possible involvement in allowing Russians to evade US sanctions through its platform.
The US Department of Justice’s national security division is investigating whether Binance or its executives violated US sanctions related to Russia’s annexation of Crimea and interference in Ukraine. This probe is separate from an ongoing inquiry by the DOJ’s criminal division into Binance’s compliance with anti-money laundering and tax laws.
Binance has been under increasing scrutiny from regulators around the world, who have expressed concerns about the lack of oversight and transparency in the crypto industry. In March, the US Commodity Futures Trading Commission (CFTC) accused Binance of operating illegally in the US and offering derivatives to US customers without registration. However, Binance and its CEO denied any wrongdoing and said that the exchange does not offer any products or services to US residents.
