Regulators Question Compliance Monitors as Binance Seeks Early Exit

Binance is in advanced negotiations with the U.S. Department of Justice (DOJ) to remove the independent compliance monitor imposed as part of its $4.3 billion settlement in 2023. This development could significantly reduce the regulatory oversight burden on the exchange, provided the DOJ approves the change. The monitor was initially imposed after the DOJ determined that Binance had failed to adequately comply with U.S. anti-money laundering (AML) rules. Under the terms of the settlement, Binance admitted to significant compliance shortcomings and agreed to pay one of the largest corporate penalties in U.S. history .

The removal of the monitor is part of a broader shift in the DOJ’s approach to regulatory oversight, with officials reportedly questioning whether such measures provide long-term benefits or simply impose unnecessary costs on businesses. Matthew Galeotti, the head of the DOJ’s Criminal Division, noted that while compliance monitors can prevent repeat violations, they also risk interfering with lawful business operations. Recent examples include Glencore Plc, which spent over $140 million on compliance monitoring before the requirement was lifted. Similarly, British banking group NatWest and defense contractor Austal USA were allowed to replace their monitors with strict internal reporting requirements .

Binance has made significant strides in improving its compliance infrastructure since the 2023 settlement. The company has expanded its compliance department, upgraded internal systems, and moved closer to meeting regulatory standards. These developments have paved the way for the current discussions on ending the three-year monitorship before its scheduled conclusion. If the DOJ agrees, Binance would still operate under strict internal reporting obligations, including enhanced compliance audits and regular updates to prosecutors. Additionally, a separate monitor tied to Binance’s settlement with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) would remain in place to ensure continued oversight .

The potential removal of the DOJ compliance monitor aligns with a broader trend under the current administration, which has shown a more favorable stance toward the crypto industry. This includes legislative efforts such as the GENIUS stablecoin bill and the recent Market Structure and Anti-CBDC legislation. Regulators, including the Securities and Exchange Commission (SEC), have also signaled a shift toward providing clearer guidance rather than enforcing through litigation. The SEC recently clarified its position on tokenized assets, including its stance on liquidity tokens, while also ending its “regulation by enforcement” approach .

The outcome of these negotiations will have broader implications for the crypto industry. If Binance successfully removes the monitor, it may set a precedent for other exchanges facing similar compliance requirements. The industry is closely watching the discussions, as the result could influence future regulatory strategies and reduce the operational costs associated with external oversight. However, no agreement has yet been finalized, and the DOJ has not confirmed its current position on the matter. Binance’s ability to demonstrate sustained compliance improvements will likely be a key factor in the DOJ’s decision-making process .

In parallel, the global regulatory landscape for digital assets continues to evolve. Countries such as the United States, Japan, and Singapore are refining their frameworks to foster innovation while maintaining financial stability. The U.S., in particular, is moving toward a more structured regulatory environment, with the introduction of clearer rules for decentralized finance (DeFi), stablecoins, and digital asset exchanges. These changes are expected to encourage institutional adoption and enhance investor confidence in the digital asset market .