Amid the continuous regulatory scrutiny, Binance.US, the American arm of the world’s largest cryptocurrency exchange, has disclosed it is now contemplating cutting down founder Changpeng Zhao’s (CZ) majority stake in the company.

This move comes in response to regulators targeting the exchange. And according to the report, this latest move is in the favor of the company as it will remove any challenges regarding the obtaining of any future regulatory license. 

Cutting Down Control

On Thursday, The Information reported that Binance.US executives have been in discussions with Zhao about reducing his stake in the company. The move is said to be aimed at addressing concerns over regulatory compliance and bolstering the exchange’s standing with US regulators.

Binance.US is currently in the process of seeking regulatory approval in the US to expand its offerings, but the company’s association with Zhao has raised questions about its ability to meet the necessary regulatory requirements. 

In March, the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against the exchange and its CEO over allegedly operating an “illegal” digital asset exchange along with a “sham” compliance program. 

The lawsuit alleges that both Binance and its executives engaged in “willful evasion” of US law while exploiting regulatory loopholes to gain a competitive advantage.

The regulatory scrutiny has put pressure on Binance.US to take action to distance itself from its founder and demonstrate its commitment to compliance. While discussions are ongoing, it is unclear how much of Zhao’s stake Binance.US intends to reduce or whether he will retain a controlling interest in the company.

CZ’s Prior Move

Notably, the reduction of Zhao’s control is not a new development, as he has reportedly been seeking to sell some of his stakes since last summer. However, the CFTC lawsuit and subsequent regulatory challenges have given renewed impetus to efforts to dilute his control. 

The move would also align Binance.US with the growing trend among cryptocurrency exchanges to separate ownership and management, as regulators increasingly scrutinize the sector.

Executives of the US arm are said to be concerned that the CFTC lawsuit targeted against Zhao, could hamper the company’s efforts to obtain certain regulatory licenses in the US. 

According to The Information, the company is seeking to allay regulators’ concerns by distancing itself from Zhao’s controversial reputation in the industry. This could pave the way for Binance.US to expand its services and compete more effectively with other exchanges in the US.

Following the news, Binance Coin (BNB) has recorded a sharp decline, plummeting 2% in the past 24 hours. BNB has moved from trading above $310 to trading below it at the time of writing. The asset trading volume has only ranged around $600 million in the past 24 hours.

Featured image from Unsplash, Chart from TradingView