Binance 2024 Outlook: Regulatory Implementation, Transformation of Professional Manager System, and Web3 Layout

Written by: Deep Tide TechFlow

British Prime Minister Churchill once said: "Never waste a good crisis."

Countless entrepreneurs regard this saying as a guiding principle. The market is like a turbulent sea, and each crisis may represent a new round of reshuffling and reorganization. Competitors who can seize the opportunities hidden within the crisis can turn the tide, end the previous era, and usher in a new one with a fresh outlook.

Looking back at the development of the cryptocurrency industry in 2023 from the vantage point of early 2024, Binance, which has experienced a change in CEO and a massive fine, seems to be a powerful practitioner of this famous saying: Faced with a harsh market test, aggressive regulatory overseers, and opportunistic industry competitors, Binance has remained steadfast while undergoing a significant transformation:

What remains unchanged is: adhering to the user-first principle and maintaining a transparent and secure financial baseline; firmly practicing the commitment to "promote the free flow of value"…

What has changed is: further shedding personalized labels and moving towards institutional improvement; further embracing regulation and exploring compliance pathways; further deepening efforts in educating users, incubating products, and lowering barriers to enhance Web3…

As we face the already arrived 2024, under the combined influence of regulatory crises and initial opportunities in the bull market, running steadily seems more important than running fast. How will Binance respond to this new phase of business development?

This article aims to review the significant events and response strategies that Binance experienced in 2023, and to look forward to 2024 in light of a series of strategic moves made by Binance at the beginning of the year, in order to gain further insights into market trends and the opportunities and challenges in the upcoming bull market.

$4.3 Billion Fine: A Bold Move to Explore Regulatory Compliance Standards

Perhaps many people still vividly remember the shock and concern they felt two months ago upon seeing Binance's "$4.3 billion" fine.

On November 22, Binance officially announced that it had reached a settlement with the U.S. Department of Justice, the Commodity Futures Trading Commission, the Office of Foreign Assets Control, and the Financial Crimes Enforcement Network regarding investigations into historical registration, compliance, and sanctions issues. As part of the settlement agreement, Binance agreed to plead guilty and pay over $4.3 billion in fines.

The shock stemmed from the enormous amount, which is considered the largest fine in the history of Chinese entrepreneurship; the concern was that the road to regulatory compliance is long and arduous, leaving the future of the cryptocurrency industry in jeopardy.

In fact, such concerns are not unfounded. The shadow of regulation loomed over the entire cryptocurrency industry in 2023: In February, Kraken paid a $30 million fine claimed by the SEC and shut down its equity services in the U.S.; in June, the SEC scrutinized Coinbase; in September, the SEC made its first charges against the company behind the NFT project Impact Theory…

After the approval of the Bitcoin ETF, people gradually realized that this seemed to be "cleaning the house before inviting guests," as a large number of traditional financial institutions from Wall Street flooded in, becoming a new force influencing the cryptocurrency market, while also bringing new increments.

In the native world of cryptocurrency, we need a role that not only holds significant influence to attract the attention of regulators but also possesses the ability and strength to mediate between regulators and the regulated, promoting the establishment of standards and the improvement of regulations in the cryptocurrency industry.

Binance may be the best candidate for this role.

On one hand, Binance's position in the cryptocurrency industry is self-evident: A recent report by Bitfinex analysts emphasized that the number of global cryptocurrency holders has reached 575 million. According to official data, Binance had over 170 million registered users worldwide in 2023. As the absolute leader among exchanges, Binance's decision to pay a $4.3 billion fine in exchange for the right to continue operating can be seen as a form of protection for the current cryptocurrency market, and its high market share makes Binance's regulatory compliance battle with the U.S., the world's largest sovereign nation, sufficiently representative. This is bound to be a difficult process, but each step of negotiation and competition between the two parties will, to some extent, push the industry towards compliance.

On the other hand, Binance has rich experience in regulatory compliance over the years: embracing regulation is a long-term accumulation process, and Binance has already obtained licenses, registrations, and authorizations in 18 jurisdictions worldwide through joint ventures and acquisitions. Additionally, Binance has actively cooperated with law enforcement agencies to combat illegal activities involving cryptocurrency assets. In 2023 alone, Binance responded to over 53,000 law enforcement requests globally, assisting judicial authorities in cracking multiple cases involving over a billion dollars; furthermore, Binance has taken on the role of a "missionary," hosting 120 training sessions in 2023 to educate law enforcement personnel about cryptocurrency and its positive effects in combating financial crime. Solid regulatory compliance knowledge and rich communication experience not only make Binance a benchmark for industry regulation but also enable Binance to make rational decisions when facing regulatory requirements from judicial authorities, which is undoubtedly a valuable experience for the entire cryptocurrency industry.

In the face of the doubts and concerns caused by this regulatory storm, Binance has truly embodied the principle of "never waste a good crisis."

It is worth noting that the U.S. agencies' solutions did not accuse Binance of misappropriating user funds or market manipulation. This means that during the five-year litigation investigation in the U.S., Binance has withstood the test of fund security and transparency, which has significantly enhanced user trust: According to DeFillama data, since November 22, Binance has shown a stable positive inflow of funds, and as of the time of writing, its fund reserves have reached $820.18 million, an increase of nearly 20% since the settlement date.

Nevertheless, Binance has not relaxed its efforts regarding fund security and transparency. The Proof of Reserves (PoR) system reflects its commitment to the safety and transparency of user funds. As of 2023, Binance's PoR system supports 31 types of tokens, and it will continue to support more in 2024.

Concerns also arise from whether the "$4.3 billion" fine will jeopardize Binance's financial status. In a December AMA session, co-founder He Yi calmly stated that Binance's capital structure has no debt, expenditures are moderate, and the fine will not have a financial impact… Binance's operational logic is to provide good services; when the head effect is strong enough and the user base is large enough, collecting service fees is sufficient, and there is no need to compete against users.

Additionally, Binance stated in its 2023 year-end report that it invested a total of $213 million in compliance technology, processes, and talent, a 35% increase compared to the previous year ($158 million).

Looking ahead to 2024, reports from dozens of top cryptocurrency institutions have highlighted the issue of "regulation." Institutions including Coinbase, Gemini, and Spartan have stated that cryptocurrency regulation will gradually become clearer in 2024, and the acceleration of the compliance process will attract larger institutions to participate in the cryptocurrency field.

In his first community AMA appearance, Binance's new CEO Richard Teng made three major commitments, the second of which is "to closely cooperate with global regulatory agencies, uphold industry standards, embrace Web3, and promote the adoption of cryptocurrencies."

It is foreseeable that "regulation" will be one of the key narratives in 2024. As a pioneer in promoting regulatory implementation, Binance's new CEO Richard Teng stated that embracing regulation provides a relatively safe environment for the industry or users to conduct transactions, which will attract more institutional investors and increase the global adoption rate of cryptocurrencies, ultimately benefiting the entire industry. More and more countries are regulating cryptocurrencies, which will enhance investor confidence. Furthermore, institutional investors are actively laying out in the cryptocurrency field, which will bring more funds and investments to the industry.

CZ's Departure: Shedding Personalization Labels and Moving Towards a Mature Institutional Framework

Another explosive piece of news announced alongside the "$4.3 billion" fine was that Binance founder CZ stepped down as CEO, with Richard Teng, the head of Binance's global regional markets, taking over the position.

Some lament the hero stepping back, while others ponder how the project can shed its personalization label and move towards institutional maturity.

Since 2015, during the two bull market cycles, we have seen the DeFi pioneer Andre Cronje announce his exit, leading to a sharp decline in the prices of dozens of tokens, and the founder of Three Arrows Capital, Su Zhu, causing multiple meme projects to surge due to news of his impending release… We seem to have become accustomed to the KOL (Key Opinion Leader) phenomenon of project founders: they respond to the community's calls, they cultivate their personal Twitter branding, and their every move is deeply tied to the project's development. This situation is even more pronounced in the exchange sector, where figures like CZ, Brian Armstrong, and Justin Sun have all stirred up waves on social platforms.

Such cases are not uncommon, but this operational logic may not be healthy.

The KOL phenomenon of founders can indeed help projects gain attention and establish effective communication bridges between the project and users, bringing the project closer to the community. However, projects should not overly rely on the personal influence of founders, especially in the cryptocurrency industry: on one hand, the departure of a founder/key member can lead to significant user loss in the community; on the other hand, it adds more uncertainty in the current regulatory game.

In modern business logic, a well-developed corporate system can help establish a reasonable organizational structure and clearly defined responsibilities, ensuring coordination and cooperation between various departments and functions, improving production efficiency and service quality, and ensuring the stable development of the enterprise.

In contrast to this leadership change at Binance, we must acknowledge CZ's immense contributions to Binance and the entire cryptocurrency industry, but the series of calm responses from Binance after CZ's departure is even more thought-provoking: amidst public outcry, they quickly partnered with the new CEO to appear in the community, advancing various tasks in an orderly manner from technology to market, from the exchange, BNB Chain to wallets, and clearly and confidently addressing the concerns of the community during the AMA.

At this moment, the previously overlooked complete institutional framework of Binance, which had been overshadowed by CZ's personal influence, gradually came to light: it not only demonstrates the team's cohesion and problem-solving ability but is also fundamental to the long-term stable and healthy operation of the project. Many friends in the community who have noticed this issue have likened it to Bitcoin: although its creator Satoshi Nakamoto remains anonymous, the Bitcoin financial system he left behind continues to operate stably, embodying the spirit of decentralization.

This leadership change seems to awaken the cryptocurrency community to a new phase of development from "looking at people" to "looking at systems": projects that shed or weaken their personalization labels are a sign of moving towards a more mature modern enterprise. For Binance, this marks the transition of the exchange to a professional brokerage stage, where users no longer trust a person but a mature system, as systems are inherently more stable than individuals.

Deepening the Layout of Web3: User-Centric Promotion of Large-Scale Blockchain Adoption

Of course, excellent industry-leading projects not only need to observe the market and adapt but also need to learn to "create momentum": by understanding user needs, integrating resources, and laying out upstream and downstream industries, they can provide users and the entire industry with a lower threshold, higher efficiency, and a smoother and richer Web3 participation experience, while leading industry innovation.

In 2023, as the leading exchange with a vast user base, capital, and business resources, Binance's "creating momentum" is based on user needs, focusing on "promoting larger-scale blockchain adoption and accelerating the arrival of Web3."

The first step towards large-scale adoption is to lower the barriers. Understanding this principle, Binance has been continuously promoting blockchain education while launching the Binance Web3 wallet.

In terms of education, Binance Academy launched online blockchain courses in 31 languages worldwide in 2023, helping 27 million learners deepen their understanding of the digital finance world. Offline, Binance Academy's footprint has covered 45 countries, providing blockchain learning opportunities for 10,000 students globally.

Regarding the Web3 wallet, as a decentralized wallet, Binance helps users avoid concerns about the storage and leakage of mnemonic phrases through MPC technology while enhancing security through key sharding, all while retaining the advantages of self-custody. Currently, the Binance Web3 wallet supports multiple mainstream networks, including Bitcoin, Bitcoin Cash, Litecoin, Dogecoin, and Sei, and has integrated over 25 dApps, allowing users to transfer, receive tokens, and experience various dApps within the wallet.

Another significant advantage is that the wallet is directly integrated into the Binance App, allowing users to switch between CeFi and DeFi with one click and always trade at the best prices across multiple networks, further breaking down barriers between Web2 and Web3, helping more Web2 incremental users enter Web3, thus promoting the rapid development of Web3.

After entering the Web3 ecosystem, Binance also hopes to attract users to stay long-term through a well-developed Web3 ecosystem.

In the previous bull market, Binance had already completed upstream and downstream resource integration through the incubation of its own public chain, BNB Chain. The multi-phase incubation plan led by Binance Labs aims to discover innovative projects in the industry and provide technical, financial, and operational support. The vast user base and capital are no longer limited to trading but are reaching deeper into DeFi, social, GameFi, NFT, and other tracks through BNB Chain and the entire ecosystem.

In the past year of 2023, even amid a sluggish market, Binance Labs remained active in project investment and incubation, providing opportunities for over 2,000 projects to showcase themselves and directly investing in 36 of them, with 36% of Binance Labs' investments focused on DeFi, solidifying Binance's absolute advantage in this field. Binance Labs currently manages over $10 billion in assets and has over 250 portfolio companies in 25 countries/regions, continuously and strategically incubating, enriching Binance's Web3 ecosystem and injecting innovative vitality into the industry.

As we approach 2024, He Yi revealed that Binance Labs has made some strategic adjustments, deciding to significantly support blockchain startups, potentially at a scale ten times larger than before, to support Web3 entrepreneurs who are genuinely committed to long-termism.

In addition, the ecological construction centered around the Binance Web3 wallet is also accelerating. In the future, Binance will focus on updating and iterating the Web3 wallet, improving wallet functions by listening to community needs, and will support more networks and applications.

Promoting the implementation of blockchain technology in the real world is another avenue for Binance's "promoting larger-scale blockchain adoption."

Binance has deeply explored areas such as art, charity, and real-world asset tokenization. Additionally, the launched Binance Pay/Card payment function aims to integrate cryptocurrency into daily life: users can use this function to pay with digital currencies at stores and businesses that support Binance payments. Currently, over a hundred merchants support this function, covering various scenarios such as travel and gaming. From 2022 to 2023, the number of users using Binance Pay/Card for payments increased by 54%, and the number of active Binance Pay users rose by over 20%.

Conclusion

When discussing 2024, Richard Teng expresses undeniable anticipation:

"In the past year of 2023, although we faced challenges, our achievements remain remarkable. Our registered users increased by 30%, the number of users on our C2C platform grew by 39%, daily active users on Binance Square surged by 71%, and the number of users for our newly launched Web3 wallet has also surpassed one million… Our community supports us, which makes us stronger. We will continue to be user-centric, and we will also transition to becoming a compliance-driven organization, which will enable us to achieve sustainable development and prosperity over the next 60 years."

Looking back at the previous bull market, Binance was the first to incubate its own public chain, allowing it to stand out in the competition among exchanges. This demonstrated Binance's precise grasp of market demand, relentless exploration of industry innovation, and rapid technological response. As the new bull market cycle begins, Binance is once again the first to embrace regulation and deepen its layout in Web3. Will Binance once again hit the right narrative and maintain its leading position among exchanges?

As the market warms up and competition intensifies, we shall wait and see.