The Commodity Futures Trading Commission’s suit against Binance follows years of reports of various regulators putting the exchange in their crosshairs, including an ongoing criminal investigation by the US Department of Justice.
It also follows several months of CEO Changpeng “CZ” Zhao reconfiguring his lobbying and government relations programmes in Washington.
New in town
Perhaps most notably, Binance widely publicised its membership in the Chamber of Digital Commerce, the longest-standing crypto-focused trade association, in December.
Trade associations are not required to disclose specific funding from members such as Binance, and they don’t report overall income until several years after the fact. For example, the Chamber of Digital Commerce disclosed $250,000 in lobbying spending in the last quarter of 2022.
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Both Binance and its affiliate, Binance.US, are top-tier members. Binance was also a leading sponsor of the Chamber of Digital Commerce’s Blockchain Summit in Washington.
Held a week before the CFTC case dropped in March, the summit’s speakers included three CFTC commissioners as well as Binance’s head of public policy.
Binance per se didn’t have an official foothold in Washington prior to December. The exception is via US affiliate, BAM Trading, which operates Binance.US. Though billed as a separate company, both firms are firmly under Zhao’s control, as the CFTC wrote in its complaint.
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Binance.US had been a member of the Chamber of Digital Commerce since March 2020. But it has also long contracted its own lobbyists to run point on Washington relations. It flipped those contracts around the same time that Binance joined the association.
Binance.US contracted FS Vector and Fierce Government Relations to do lobbying, filing registrations for both on December 15, according to lobbying disclosures reviewed by The Block. They reported spending $50,000 on each, in quarters that were incomplete.
Those contracts replaced two that had been terminated. Prior to the most recent quarter, Binance.US had paid Hogan Lovells and Ice Miller Strategies $220,000 and $90,000 a quarter, respectively.
However, those relationships still stand in a new form: global Binance Holdings contracted both Hogan Lovells and Ice Miller filing registrations in January that disclosed the new contracts, which seem to be direct handoffs from Binance.US, despite claims of distinction between the two firms. It is the first time that Binance global has directly contracted U.S. lobbyists.
As to the new Binance.US firms, FS Vector is one of the biggest fintech lobbying operations in Washington. Its team includes co-founder John Beccia, a former general counsel for Circle, and John Collins, Coinbase’s first head of policy.
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It also has a contract with the Chamber of Digital Commerce that net FS Vector $70,000 last quarter. The FS Vector staff named on the Chamber of Digital Commerce and Binance.US contracts are nearly identical.
The Lobbying Disclosure Act classifies a fairly narrow range of activities as lobbying that must be reported. Consequently, these figures represent a low threshold for the total value of the overall contracts.
None of the lobbyists or their law firms responded to requests for comment. A representative for the Chamber of Digital Commerce declined to comment. None would confirm or deny the continuation of their business relationships with Binance or Binance.US.
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Binance.US’ PR team did not return a request for comment. Binance global wrote in a statement, “We intend to continue to collaborate with regulators in the US and around the world. The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime.”
Beyond lobbying, Binance.US with the help of Hogan Lovells’ Michael Bell also plans to launch a political action committee at the end of November. As of the most recent data from the end of February, that PAC had not reported any contributions.
Back in August 2020, Binance.US’s entry into the Blockchain Association, the largest crypto trade association by lobbying spending, led Coinbase to leave in a high-profile protest.
Coinbase would go on to start the Crypto Council for Innovation alongside Block, Fidelity and Paradigm in April 2021.
Binance.US subsequently departed the Blockchain Association with some acrimony last April, reportedly aiming to start its own lobbying shop. Though Binance global subsequently went on a compliance hiring spree, Binance.US has not reported any internal lobbying, only outside contracts.