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OP-ED: Why Binance may lose its key market in Russia

In this photo Russia's President Vladimir Putin

Please note: This article expresses the opinion of an author and is not affiliated with Finbold.com editorial board.

Vladislav Ginko, an author of this OP-ED story, is a former vice-rector of Moscow-based Jewish University. He worked as a Corporate Finance lecturer at New York-based Touro University. Currently, he is an analyst and lecturer at Russia’s leading state think-tank, Presidential Academy.


Russia’s turn to innovations in underway, but the digital assets industry must start thinking about its transparency standards.

The cryptocurrency exchange Binance is one of the controversial participants of the blockchain sphere. It’s a centralized trading platform, and there’s no trustful information where its headquarters exists.

Recently Malta’s Financial Services Agency (MFSA) made a statement on Binance saying that “following a report in a section of the media referring to Binance as a “Malta-based cryptocurrency” company, the MFSA reiterates that Binance is not authorized by the MFSA to operate in the cryptocurrency sphere.”

Malta Financial Services Agency’s public statent on Binance.

I’ve also found the data that Binance Europe Services Limited was registered on the passport of the individual and based in Shanghai. Meanwhile, there’s a well known Bitcoin trade ban in China.

This ambiguity in Binance’s activities may raise concern among Russia’s regulators. Russia is still one of the key markets for Binance.

Currently, Russia is trying to clarify its path to digital assets regulation. The fresh law draft, if adopted, may introduce a Bitcoin trading ban in Russia. Gleb Kostarev, the representative of Binance in Russian and CIS countries (Commonwealth of Independent States), has said that:

“Now everybody uses cryptocurrency just to trade rather than pay for goods or services, so if we couldn’t trade digital assets, that are speculative instruments, then the main use case vanishes”.

The uncertainty within the digital assets trading together with Binance’s non-transparency may play as a trigger to Russia banning Bitcoin.

Binance might influence Russia on banning Bitcoin

Indeed the great motto of the crypto sphere is that it’s going to be more competitive than the legacy system in the financial services in times of transparency. But this leads to the logical outcome that Binance must not be less transparent than Wall-Street.

In this case, where are the independently audited financial statements of Binance publicly available? The disclosure of financials might help to prove the existence of the reserves fund usually called “SAFU fund”. Otherwise, we are forced to rely on some kind of “Proof-of-Word”.

The Binance boasts of itself as “the no.1 company in the industry”. This statement was in the description of the job position of Government Relations Manager listed on May 20, 2020. At the time of writing the vacancy was archived. The job position also stated that “Binance is the no.1 cryptocurrency exchange in the world”. However, it raises many questions.

Where’s the independent proof for that statement if one sees a sign of the influence of Zhao’s team on CoinMarketCap (bought by the Binance) ranking? 

A key question

Who’s GR-manager of the Binance now? It’s a key question if Binance doesn’t want to lose Russia’s market. From my experience as a GR-manager for various industries, I may say that it’s very important to be persuasive in figures and submit to Russia’s ministries a clear view of what real input of the crypto sphere may bring to Russia’s economy in terms of employment, investments, and taxes. And of course, the key factor of successful negotiations is full financial transparency.

Russia’s President Vladimir Putin has recently intensified the turn of the country to the adoption of the innovation pursuing the goal to rebuild Russia into a world digital superpower. Putin recently said that “Russia is a unique civilization. If we’re going to preserve this civilization then we are bound to focus on high technologies and their further development.” 

Transparency matters

On June 10, 2020, Russia’s President led a meeting whose agenda became the issue of information and communication technologies development. He stated that “it is necessary to remove barriers to free up the opportunities and support prospective projects in the field of information technologies”.

Putin urges the Government and Russia’s parliament to adopt the law of “regulatory sandboxes”. So there’s an apparent will of Russia’s leader to bring the country’s economy on the innovative path.

At the same time, this move stipulates that the digital assets sector, and especially Binance (as “the no.1 company in the industry”), must demonstrate that it has outstanding transparency standards.

Russia opens doors, and by the way, I urge Pavel Durov (founder of Telegram messenger), whose TON and Gram tokens project has got a harsh blow from the U.S. SEC, try a chance to negotiate the terms of his comeback to the Motherland.

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Author

Vladislav Ginko is a former vice-rector of Moscow-based Jewish University. He worked as a Corporate Finance lecturer at New York-based Touro University. Currently, he is an analyst and lecturer at Russia’s leading state think-tank, Presidential Academy.