Binance eyes stake in Malaysian digital asset exchange, sources say

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BINANCE, one of the world’s largest cryptocurrency exchanges, is seeking to acquire a minority stake in MX Global Sdn Bhd, a digital asset exchange (DAX) licensed by the Securities Commission Malaysia (SC), sources say. .

The sources say the acquisition is pending SC approval, adding that it has received the green light from the Companies Commission Malaysia (CCM).

In its email response to the case, the SC said: “The SC does not confirm or comment on requests made to the SC.” Meanwhile, MX Global CEO Datuk Fadzli Shah said he had no comment when contacted by The Edge.

As of this writing, a Binance director in charge of global partnerships has not responded to The Edge.

According to a CTOS report, the directors/executives of MX Global include Datuk Seri Mohd Mokhtar Mohd Shariff, who is an independent non-executive director of My EG Services Bhd (according to the company’s 2020 annual report), independent and non-executive chairman of TMC Life Sciences Bhd and Chairman of licensed peer-to-peer funding platform Capital Bay; and Datuk Mat Noor Nawi, independent non-executive director of Cuscapi Bhd.

Another CTOS report shows that MX Global is 100% owned by Hachiman Technology Sdn Bhd, which in turn is 100% owned by Jason Chan Ling Khee.

Chan was the chief technology officer of My EG Services, according to the company’s 2018 annual report. He was not listed in the company’s annual report in subsequent years, and information on his Linkedin profile is sparse.

Binance has come under intense scrutiny from regulators around the world over the past year. The UK has banned its services while Japan and Hong Kong have issued warnings against it, mostly based on consumer protection and anti-money laundering controls.

In fact, the SC issued a public rebuke to Binance last July for operating as a DAX without obtaining the necessary regulatory approvals.

The public reprimand was issued against Binance Holdings Ltd (registered in the Cayman Islands), its CEO Zhao Changpeng and three other Binance entities, including Binance Asia Services Pte Ltd which is registered in Singapore.

Binance was ordered to immediately cease operations while its website was banned locally. However, many investors and traders in the crypto community continue to access its website using a virtual private network (VPN).

In Singapore, Binance Asia Services withdrew its application to the Monetary Authority of Singapore last December to operate a licensed cryptocurrency exchange and ceased operations in the country on February 13.

Instead, Binance announced last December that it was acquiring an 18% stake in Hg Exchange, a regulated private stock exchange in the city-state.

In 2020, Binance made strides in Indonesia by acquiring cryptocurrency exchange Tokocrypto, the first exchange regulated by the country’s commodity futures regulatory agency.

Focus on cross-border trade

Andrew Vong, future director of EquitiesTracker Holdings Bhd and trainer for the firm’s cryptocurrency masterclass, is optimistic about Binance’s acquisition of MX Global.

He says such a move would add more dynamism to the cryptocurrency industry and encourage innovation by creating stronger competition among market players.

All eyes will be on whether local investors can access Binance’s “global liquidity pool”. If so, they will be able to trade with Binance users around the world, he explains.

For now, local DAX users can only trade with others who have gone through the regulated local exchange onboarding process.

“Liquidity on licensed local exchanges is still not great, even for the largest in the market,” Vong says.

An industry player who requested anonymity sees the acquisition as beneficial to the local cryptocurrency industry as it will attract foreign investment and create new jobs.

He agrees that locals will be eager to access Binance’s global backlog if the acquisition goes through, as it is in Indonesia right now.

“For example, the order book that Tokocrypto shows its users on the screens is the same as the one on Binance’s website, which means that its users can trade [cryptocurrencies] with Binance users around the world.

“If that happens, it will be interesting to see if other locally licensed DAXes will also open their global backlog to local users.

“At this time, KYC (know your customer) rules under the SC guidelines require users of a licensed DAX to be onshore. Local DAX users cannot transact cross-border with another person shipped abroad.

The person believes that cross-border transactions are not allowed as regulators struggle to perform proper KYC and anti-money laundering checks on foreign cryptocurrency traders, which could lead to money laundering activities.

Change strategy

Vong from EquitiesTracker thinks Binance is doing its best to comply with regulations. “In the crypto space where regulations are still being worked out, it seems like Binance is being ‘cornered’ by regulators around the world. I think CZ (CEO Zhao Changpeng) continues to evolve its strategy to comply with regulations.

He says Binance does not yet have a global headquarters, in part because of its fragile relationship with regulators. He tried to set one up in Malta last year, but the move was unsuccessful.

“It is currently in talks with Dubai and Abu Dhabi to set up its headquarters in the Middle East.”

Vong adds that the acquisition, if it goes through, is unlikely to have a significant impact on the local market as Binance is only acquiring a minority stake in MX Global.

Another industry player familiar with regulatory issues has a different perspective. He says that Binance has changed its strategy in its attempt to comply with regulations globally.

“After failing to apply for a license in Singapore, it appears to have changed its strategy to acquiring licensed entities in various countries to hedge its bets.”

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