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Crypto firms are rushing to hire former regulators as federal agencies look to tame the 'Wild West' industry

Changpeng ZhaoAndrey Rudakov/Bloomberg via Getty Images

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Earlier this week, Binance CEO Changpeng Zhao said he spends 80% of his time dealing with regulation. And if hiring choices are any indication, he's hardly exaggerating.

In the past few months, the biggest crypto exchange has brought on a small army of former regulators — including former acting Comptroller of the Currency Brian Brooks, Senate Finance Committee chair Max Baucus, IRS criminal investigator Greg Monahan, and California's chief financial regulator Manuel Alvarez. Since May, Binance says they have added 110 new employees to its compliance and customer-support teams.

Other crypto firms are also rushing to onboard former regulators, including most recently Donald Trump's SEC Chair Jay Clayton joining the $2 billion crypto platform Fireblocks. In April, former CFTC Chair Chris Giancarlo joined the board of BlockFi. Ripple hired Barack Obama's SEC Chair Mary Jo White to defend the company against a lawsuit from her former agency.

Binance's high-profile hires have come in response to a rapidly mounting regulatory crackdown on the exchange, which has been restricted or banned from Italy to Malaysia. Zhao says Binance is "pivoting" to a proactive approach to regulation from a reactive one.

But the pivot has been fraught with difficulties. Brooks and Alvarez's recent resignations came right after a $100 million deal collapsed over fears that Zhao had too much control over Binance's US division, which is nominally independent.

Regulators, too, have been trying to balance proactive and reactive approaches. When SEC Chair Gary Gensler called crypto the "Wild West," he suggested greater enforcement would be the agency's priority. But SEC Commissioner Hester Peirce has pointed out that crypto needs forward-looking frameworks, too — so that firms know what the bounds of the law are.

"I think we are moving in the direction of developing a forward-looking regulatory framework, but I expect a long journey to get there," Daniel Bresler of law firm Seward & Kissel's blockchain unit told Insider.

The rapidly evolving regulatory environment amid an immature industry is likely a factor behind regulators' resignations. In a parallel with Binance's woes, former SEC official Brett Redfearn, who Coinbase brought on in April, left the company this month, citing a shift in priorities away from crypto securities, according to the Wall Street Journal.

Despite these growing pains, more hires may be ahead, as the $2 trillion industry tries to insulate itself.

"If we don't start planning and taking action soon, we have everything to risk," crypto lobbyist Perianne Boring told the New York Times.

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