Binance panned for regulatory dodginess


A new breaking report from Reuters contends that popular cryptocurrency exchange Binance has been less than forthcoming with regulators.


In describing the company’s move to Malta, writers Angus Berwick and Tom Wilson allege that the company withheld info from regulators and conducted “weak checks” of customers in an age where AML/KYC is paramount.


Binance’s leader Changpeng Zhao is described as balking at anti-money laundering rules, and the journalists claim the company used encrypted Telegram messages to talk about what leaders saw as onerous KYC requirements.


“Reuters conducted dozens of interviews with former senior employees of Binance, advisers and business partners, and reviewed hundreds of documents, including confidential correspondence between Binance and national regulators, and internal company messages,” the duo write. “The reporting shows Binance has operated outside rules that govern traditional financial firms and many crypto rivals. An opaque corporate structure has enabled Binance to offer products that many national regulators don’t allow locally registered firms to sell. Binance has repeatedly declined to specify in which jurisdiction its main online exchange is based, complicating regulators’ efforts to oversee its activities. And it has minimised costly client background checks.”

In the past, Binance was a darling of crypto fans for its abundant on-ramps to cryptocurrency investment and its onboarding of different national fiat currencies.


However, last year, Binance started to be scrutinized and was limited in its U.S. operations.


Now there might be more fundamental problems in the company’s future, partially based on the more concrete findings enumerated by Berwick and Wilson.


“On at least four occasions, Binance declined to provide detailed answers about its operations when asked by financial authorities and business partners, according to regulatory filings and people with direct knowledge,” Berwick and Wilson write. “Last year, Binance watered down compliance rules arranged with a German business partner, causing disquiet among some Binance staff.”


Black hats, they say, also took advantage.


“On Sept. 14, 2018, hackers broke into a Japanese crypto exchange called Zaif and stole $63 million of cryptocurrency,” Berwick and Wilson add. “They transferred a $10 million portion to Binance to ‘launder’ it, according to a civil complaint Zaif filed against Binance in January last year in San Francisco Superior Court in California.”


If you’re interested in Binance as an exchange, this is a story to watch.