Binance US, the American partner of one of the most important cryptocurrency exchanges in the world, failed to complete a $100 million funding round leading to the resignation of its CEO.
The crypto exchange has been trying to set its foot in the US by complying with local regulations and has set its eyes on launching an Initial Public Offering in the world’s biggest economy.
The company was looking to raise at least $100 million from investors, with firms like GreatPoint Ventures and SoftBank considering participating at some point.
While Binance US and Binance.com are separate entities, their sharing of their name has made investors wary of providing funding amid the controversies experienced by the latter over the past months.
Brian Brooks, Binance US former CEO, tried to put distance between both companies to help disassociate the regulatory concerns from the American-based firm but ultimately failed to do so.
He would later announce on August 6th that he would be stepping down as the CEO of Binance US.
Brook’s Short Term As CEO
Brooks had been appointed as Binance US CEO on May 1st following Catherine Coley’s replacement, holding the position only 3 months before resigning.
Brooks announced his departure via a Tweet in which he referred to “differences over strategic direction” as the reason behind it.
The former Acting Comptroller of the Currency and Chief Legal Officer for Binance was originally chosen to apply his expertise on regulatory compliance to allow the exchange to establish its US Footing, with the IPO being the ultimate objective.
With Changpeng Zhao owning about 90% of Binance US, Brook’s sought to diversify the company’s ownership structure via venture capital investment.
This would allow Binance US to reflect that it had a “truly arms-length relationship” with a company under heavy regulatory scrutiny.
As part of this strategy, Brooks also planned to transfer its technology (which it shares with Binance.com) to servers located in the U.S, which would further distance both companies.
Once this strategy failed, investors like GreatPoint Ventures’ Ray Lane were left asking themselves,
“How would we ever feel comfortable that it was an independent company using the same technology?”
Binance US’ Path Toward Compliance
Binance US was founded in 2019 in an attempt to provide American customers with a means to trade using Binance, which had been already having trouble with US regulators.
Despite operating in the US for over 1 year, the exchange failed to gain adoption in the United States.
In addition to appointing Brooks as CEO, the company brought Manuel P. Alvarez to serve as the companies’ Chief Administrative Officer in July.
Alvarez had previously served as an enforcement attorney for the Consumer Financial Protection Bureau and California’s Department of Business Oversight.
As a result, Alvarez would oversee major control functions for the company when it came to compliance and legal aspects, with Brooks referring to his “rare brilliant regulatory mind” as the key to create trust with US customers and regulators.
Despite Alvarez’s ample experience in the regulatory field, he would also resign his position later in August after they failed to successfully close the funding round.
Now, Binance US is still heavily invested in gaining the trust of local regulators by doing what Zhao described as “pivoting from reactive compliance to proactive compliance”, giving special attention to expanding its board of directors from 3 people to between 7 and 9 members.
The company may be able to rebound from this, but the US market is looking increasingly strained. US lawmakers have avoided creating solid crypto regulations, which is preventing growth.