Podcast Summary
This episode of “Unchained” features Michael Dawson, a partner at WilmerHale, and Dorothy DeWitt, founder and CEO of Tolt Strategies, discussing the future of Binance following a settlement with U.S. authorities. The conversation delves into the implications of the settlement, the role of a compliance monitor, and the potential impact on the broader crypto industry.
Key Takeaways
The Role and Impact of a Compliance Monitor
- Independent Oversight: A compliance monitor is an independent entity, paid for by the company but reporting to the government or court. The monitor ensures the company’s adherence to compliance measures and reduces the risk of future misconduct.
- Access to Information: The compliance monitor needs access to company information and data. The monitor ultimately reports to U.S. regulatory bodies, not the company itself.
Challenges and Opportunities of Monitoring a Non-U.S. Entity
- Jurisdictional Challenges: Monitoring a non-U.S. entity like Binance, which operates overseas and is theoretically not serving U.S. customers, presents jurisdictional challenges.
- Inside Access: The settlement allows the U.S. to gain inside access to Binance’s operations and influence its organizational structure, which might not be possible without ongoing jurisdictional touchpoints.
Implications for the Broader Crypto Industry
- Setting Standards: The monitorship will inadvertently set de facto regulatory standards for the crypto industry, as other companies will likely adopt best practices established by Binance to avoid similar enforcement actions.
- Ripple Effect: Binance’s compliance measures could have a ripple effect on the broader crypto industry, as customers and other exchanges may compare and adjust their processes based on Binance’s standards.
Cost and Complexity of Compliance
- High Costs: The cost of monitorships for companies like Binance is significant, with estimates suggesting tens of millions of dollars over a five-year period, potentially totaling up to $100 million.
- Complexity of Compliance: The complexity of identifying U.S. customers and ultimate beneficial ownership is acknowledged, noting that while offboarding U.S. customers sounds simple, it is a challenging task.
Future of Binance and the Crypto Industry
- Positive Attitude: Binance’s Chief Compliance Officer views the monitorship as a business accelerator and a competitive advantage, which bodes well for the company’s future.
- Industry Trend: The trend of appointing independent monitors and compliance consultants in the crypto industry is expected to continue, as seen with Coinbase and Robin Hood Crypto, following settlements with regulatory bodies.
Sentiment Analysis
- Bullish: The podcast presents a bullish sentiment towards Binance’s future, with the company’s Chief Compliance Officer viewing the monitorship as a business accelerator and a competitive advantage. The discussion also suggests that the monitorship could deter bad actors from using the platform, thereby enhancing national security and limiting illicit finance.
- Neutral: The podcast maintains a neutral stance on the broader crypto industry, acknowledging the challenges of compliance and the potential impact of Binance’s settlement on other companies. However, it also highlights the opportunity for companies to adopt best practices and improve their compliance measures.
