Binance, the world’s largest dark crypto slush fund, is struggling to find corners of the world that will tolerate its lax anti-money laundering policies and flagrant disregard for securities laws. 

On Thursday, the Cayman Islands Monetary Authority issued a statement that Binance, the Binance Group and Binance Holdings Limited are not registered, licensed, regulated, or otherwise authorized to operate a crypto exchange in the Cayman Islands.

“Following recent press reports that have referred to Binance, the Binance Group and Binance Holdings Limited as being a crypto-currency company operating an exchange based in the Cayman Islands, the Authority reiterates that Binance, the Binance Group or Binance Holdings Limited are not subject to any regulatory oversight by the Authority,” the statement said.

This is clearly CIMA reacting to everyone else blaming Binance on the Caymans, where it’s been incorporated since 2018. 

On Friday, Thailand’s Security and Exchange Commission filed a criminal complaint against the crypto exchange for operating a digital asset business without a license within its borders. 

Last week, Binance opted to close up shop In Ontario rather than meet the fate of other cryptocurrency exchanges that have had actions filed against them for allegedly failing to comply with Ontario securities laws.

Singapore’s central bank, the Monetary Authority of Singapore, said Thursday that it would look into Binance Asia Services Pte., the local unit of Binance Holdings, Bloomberg reported. 

The Binance subsidiary applied for a license to operate in Singapore. While it awaits a review of its license application, Binance Asia Services has a grace period that allows it to continue to operate in the city-state. 

“We are aware of the actions taken by other regulatory authorities against Binance and will follow up as appropriate,” the MAS said in a statement.

On June 26, the UK’s Financial Conduct Authority issued a consumer warning that Binance’s UK entity, Binance Markets Limited, was prohibited from doing business in the country. 

“Due to the imposition of requirements by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the prior written consent of the FCA,” the regulator said.

It continued: “No other entity in the Binance Group holds any form of UK authorisation, registration or licence to conduct regulated activity in the UK.” 

Following the UK’s financial watchdog crackdown, Binance customers were temporarily frozen out of Faster Payments, a major UK interbank payments platform. Withdrawals were reinstated a few days later.

Only a few days before, Japan’s Financial Services Agency issued a warning that Binance was operating in the country without a license. (As I explain below, this is the second time the FSA has issued such a warning.)

Last summer, Malaysia’s Securities Commission also added Binance to its list of unauthorised entities, indicating Binance was operating without a license in the Malaysian market.

A history of bouncing around

Binance offers a wide range of services, from crypto spot and derivatives trading to tokenized versions of corporate stocks. It also runs a major crypto exchange and has its own cryptocurrency, Binance Coin (BNB), currently the fifth largest crypto by market cap, according to Coinmarketcap. 

The company was founded in Hong Kong in the summer of 2017 by Changpeng Zhao, more commonly known as “CZ.” 

China banned bitcoin exchanges a few months later, and ever since, Binance has been bouncing about in search of a more tolerant jurisdiction to host its offices and servers.  

Its first stop after Hong Kong was Japan, but Japan was quick to put up the “You’re not welcome here” sign. The country’s Financial Services Agency sent Binance its first warning in March 2018. 

“The exchange has irked the FSA by failing to verify the identification of Japanese investors at the time accounts are opened. The Japanese officials suspect Binance does not have effective measures to prevent money laundering; the exchange handles a number of virtual currencies that are traded anonymously,” Nikkei wrote. 

Binance responded by moving its corporate registration to the Cayman Islands and opening a branch office in Malta, the FT reported in March 2018.

In February 2020, however, Maltese authorities announced Binance was not licensed to do business in the island country. 

“Following a report in a section of the media referring to Binance as a ‘Malta-based cryptocurrency’ company, the Malta Financial Services Authority (MFSA) reiterates that Binance is not authorised by the MFSA to operate in the crypto currency sphere and is therefore not subject to regulatory oversight by the MFSA.”

The ‘decentralized’ excuse

CZ lives in Singapore but has continually refused to say where his company is headquartered, insisting over and over again that Binance is decentralized. This is absolute nonsense, of course. The company is run by real people and its software runs on real servers. The problem is, CZ, whose net worth Forbes estimated to be $2 billion in 2018, doesn’t want to abide by real laws. 

As a result, his company faces a slew of other problems. 

Binance is currently under investigation by the US Department of Justice and the Internal Revenue Service, Bloomberg reported in May. It’s also being probed by the Commodity Futures Trading Commission over whether it allowed US residents to place wagers on the exchange, according to another Bloomberg report. 

Also in May, Germany’s financial regulator BaFin warned that Binance risked being fined for offering its securities-tracking tokens without publishing an investor prospectus. Binance offers “stock tokens” representing MicroStrategy, Microsoft, Apple, Tesla, and Coinbase Global.  

Binance has for five years done whatever it pleases, all the while using the excuse of “decentralization” to ignore laws and regulations. Regulators are finally putting their collective foot down. Enough is enough.

Image: Changpeng Zhao, YouTube

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One thought on “Binance: A crypto exchange running out of places to hide

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