Leading cryptocurrency exchange Binance had “gaps” in regulatory compliance in the first few years after its launch in 2017, the company’s Chief Strategy Officer (CSO) Patrick Hillmann told the Wall Street Journal in an interview.
Hillmann revealed that Binance had missteps during the implementation of its security measures, such as the Know-Your-Customer (KYC) protocol and the Anti-Money Laundering (AML) rules designed to combat money laundering activities.
Binance Admits Gaps in Regulatory Compliance
The CSO also disclosed that the lapses, which have since been tackled as Binance improved its security protocols and workforce, occurred two years after the company’s establishment while pushing for global expansion.
Hillmann blamed the shortcomings on a lack of staffing as the exchange’s small team was stretched thin, focusing on compliance, cybersecurity, and expansion at the time.
‘It’s a tremendous burden. As a result, there were some gaps in our compliance system in the first two years,” he said.
The Binance executive also noted that while the exchange was low on staff initially, the firm has tightened the loophole by expanding its compliance team.
The firm improved its headcount with more than 750 employees over the last two years. Hillmann said Binance also recently hired a new chief compliance officer, Noah Perlman, a former chief operating officer at rival exchange Gemini.
Binance in Talks With U.S. Regulators
Hillmann also revealed that Binance is currently in talks with United States watchdogs for a possible settlement to halt existing regulatory investigations into its business operations in the country.
The U.S. Department of Justice (DOJ), the Internal Revenue Service (IRS), the Securities and Exchange Commission (SEC), and the Commodities Futures Trading Commission (CFTC) have been looking into Binance, its business structure and financial reserves over the past few years.
The financial watchdogs, particularly the CFTC, began investigating Binance in March 2021 to determine whether the company violated U.S. laws by offering its products and services to residents of the country without proper authorization.
Later that year, the commodities regulator opened another probe into the company over claims of insider trading triggered by a separate investigation by the DOJ in collaboration with the IRS.
Hillmann: Authorities Are Very Collaborative
Hillmann said Binance would not reveal its discussions with the regulators, but the exchange may be required to pay a fine on penalties or even pay a higher price for remediation.
‘We just don’t know. That is for regulators to decide. It’s greatly to the benefit of our users. We just want to put it behind us,” he said.
The CSO further stated that the company is “highly confident and feeling really good about where those discussions are going,” noting that the authorities are “very collaborative.”
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