Ultimate Resource On Binance (#GotBitcoin)
Top cryptocurrency exchange Binance is launching an open blockchain project “Venus” focused on developing localized stablecoins worldwide. Ultimate Resource On Binance (#GotBitcoin)
In an announcement published today, Aug. 19, the exchange argues it is well-positioned to launch such a currency ecosystem in light of its existing public chain technology, Binance Chain, wide user base and already established global compliance measures.
Leveraging Existing Know-How
The exchange says it is seeking partnerships with governments, corporations, technology firms, and other cryptocurrency and blockchain projects in order to develop a new currency ecosystem that will empower both developed and developing countries
The exchange’s vision for the project, per the announcement, is to “build a new open alliance and sustainable community” that enlists partners who wield influence on a global scale.
Binance Chain, as the announcement notes, has already been running several native asset-pegged stablecoins, including a Bitcoin (BTC)-pegged stablecoin (BTCB) and the Binance BGBP Stable Coin (BGBP) pegged to the British Pound.
Binance says it will leverage its existing infrastructure and experience with various regulatory regimes to consolidate a compliance risk control system and build a multi-dimensional cooperation network for the Venus project.
Vying With Libra
Binance’s ambitious new venture appears to compete directly with plans from social media titan Facebook to launch a fiat-pegged stablecoin, Libra, that would power a global crypto payments network embedded into the company’s three wholly-owned apps: WhatsApp, Messenger and Instagram.
With its choice of name, “Venus,” Binance is also stepping into the astrological waters of both Facebook’s Libra project and the Winklevoss Twins’ Gemini exchange and Gemini dollar.
Binance Unveils Its First Crypto Lending Service Launching This Month
Major crypto exchange Binance will launch its first crypto lending product on Aug. 28, 2019.
According to an official announcement on Aug. 26, holders of Binance coin (BNB), Ethereum Classic (ETC) and Tether (USDT) will be able to lend their assets and earn interest through Binance’s new service called Binance Lending.
The services will be available for subscription from Aug. 28 till Aug. 29, Binance noted in the announcement. Lending products will have an initial 14-day period. BNB will have the highest annualized interest rate of 15% while the rates for USDT and ETC amount to 10% and 7%, respectively.
The first interest calculation period will be from Aug. 29 till Sept. 10. Binance added that interest payout time will take place immediately after the loan term matures. The annualized interest rates for upcoming phases will be adjusted based on market reception during this initial phase, the company stated.
Binance Gives An Example:
“If User A subscribes to 10 lots of BNB Lending (total lend of 100 BNB), the interest earned at maturity date will be 0.057534 BNB x 10 = 0.57534 BNB.”
Also today, Binance updated its Lending FAQ by adding a new section “Binance Lending Service Agreement,” claiming that the Binance Lending assets will be used in cryptocurrency leveraged borrowing business on Binance.com.
BitMEX ‘Congratulates’ Binance on Plagiarizing Its Futures Platform Doc
The team at Seychelles-registered crypto exchange BitMEX have accused fellow exchange Binance of plagiarizing BitMEX documents as part of its recent futures testnet launch.
On Sept. 4, the platform published a sarcastic tweet, stating:
“Congrats on the Testnet Futures launches @binance. Glad to see you enjoyed reading our documentation as much as we enjoyed writing it!”
The tweet included screenshots of Binance’s overview of the Auto Deleveraging system for its new futures contracts, in which the text is virtually word-for-word identical to that of BitMEX:
“Just change it a little so it doesn’t look so obvious”
BitMEX CEO Arthur Hayes himself half-jestingly commented on the incident with a meme, insinuating that if you’re in the plagiarism game, you have to at least do it with some finesse:
Arthur Hayes tweets in reference to plagiarism accusations against Binance crypto exchange. Source: @CryptoHayes
The affair quickly drew the involvement of Binance’s own CEO, Changpeng Zhao, who swiftly confessed:
“Shame on us. ???? Sorry about that. Missed this in the DD process before the acquisition (didn’t read the BitMex docs ourselves). Will fix/remove ASAP.”
CZ’s policy of “owning it” drew virtually unanimous approval on crypto Twitter — with some going so far as to imply that such copy-paste practices are part and parcel of the pressures to rapidly build out new products and services in the fast-growing industry:
One community member’s response to Binance’s plagiarism. Source: @Coinmarketscam
Hayes himself took a conciliatory tone, tweeting to CZ:
The Exchange Business
As reported earlier this week, Binance has just launched two new futures trading platforms in testing mode, having rolled out the platform’s first crypto lending product earlier this month. The full futures platform is expected to launch in September, according to CZ.
This summer, BitMEX‘s Hayes has been fielding allegations from staunch crypto critic Nouriel Roubini, who criticized the exchange’s Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations and even suggested it was violating United States securities laws.
BitMEX is also currently under investigation by the U.S. Commodity Futures Trading Commission (CFTC) over suspicions it has facilitated trading on its platform by U.S. residents.
Early Tester Finds Both Binance Futures Platforms ‘Currently Unusable’
Bitcoin futures offerings from cryptocurrency exchange Binance have come in for criticism as a pre-release tester identifies major flaws.
Rocky Start For Binance PR Move
In a series of tweets on Sept. 6, the account known as doublejump said both the options currently under consideration by Binance lacked basic features, which are essential for ease of use.
As Cointelegraph reported, Binance has released two separate versions of its futures trading platform for testing by users, and plans to reward those who test and correctly vote for the winner.
Platform A came from Binance’s own development team, while Platform B stemmed from exchange JEX, which Binance recently bought.
According to doublejump, however, neither is currently fit for purpose.
“Platform A is unusable because of its contract size granularity, but does have a nice interface and decent specifications otherwise. Platform B is not documented well and has an unwieldy leverage system,” the account summarized.
Competition On The Horizon
Further doubts focused on Binance’s choice of reference for Bitcoin (BTC) exchange rates. Doublejump noted the sources include HitBTC, while others involve Huobi, Bittrex and Binance itself.
While it remains unknown when the futures platform will launch, competition is set to increase this month with the launch of Bakkt’s physically-traded futures.
This week, meanwhile, Binance found itself in hot water after it emerged its futures documentation was copied from an existing offering by derivatives giant BitMEX.
Cryptocurrency Exchange Binance Has Been Awarded An Internationally Recognized Security
Accreditation, ISO/IEC 27001, following two external audits of its information security systems.
The exchange shared news of its accreditation in an official tweet on Sept. 23.
Two External Audits To Secure The Accreditation
The ISO/IEC 27001 standard that underpins Binance’s new accreditation is the international standard that provides the specification for information security management systems (ISMS).
The technology-neutral standard is designed to assist organizations in managing their information security processes in line with international best practices.
To be evaluated for the accreditation, the platform underwent external audits by Norway-based, international accredited registrar DNV GL and by the United Kingdom Accreditation Service.
In its tweet, Binance claimed to be “among the first global crypto-asset platforms to receive ISO27001 accreditation, & the first certified by the DNV & UKAS.”
In sharing Binance’s original tweet, exchange CEO Changpeng Zhao said that the accreditation went towards “setting higher #SAFU standards for our industry” — a reference to the Secure Asset Fund for Users (SAFU) established by Binance in 2018. It provides a form of emergency insurance protection for users and their funds in extreme situations.
Bolstering Confidence After Security Incidents
Binance’s new ISO 27001 accreditation comes following a year of thorny security issues for the platform.
In August, the platform fell victim to a hacking scandal that saw the miscreant allegedly gain possession of a huge portion of the firm’s Know Your Customer data (10,000+ personal photos).
In May, the exchange lost 7,000 Bitcoin (BTC) in a major hack of its hot wallets, worth over $40 million at the time.
Binance Now Accepting Fiat Through Alipay, WeChat
Binance is now accepting fiat through Alipay and WeChat, opening up the exchange to peer-to-peer (P2P) crypto transactions from China. The move follows a September announcement concerning the exchange’s intention to add over-the-counter (OTC) trade options for an additional fiat on-ramp.
Although an expected development, the move was first disclosed on Twitter and later confirmed by Binance CEO Changpeng Zhao on Wednesday. For now, bitcoin-for-fiat trades are only available.
One of the largest social media apps globally, WeChat currently has over 1.1 billion active users according to Statisa. Payment application Alipay has over 900 million users as well, per the China Daily.
Since the 2017 banning of cryptocurrency exchanges by the People’s Bank of China (PoBC), P2P trading has predominated in China. Earlier this year, CoinDesk reported that P2P exchange Hodl Hodl had reconfigured its security preferences to sidestep China’s Great Firewall.
Alipay To Ban All Bitcoin-Related Transactions
Alipay, the digital payment arm of Chinese e-commerce giant Alibaba, has declared that it will be banning any transactions related to Bitcoin (BTC) and other cryptocurrencies.
Combating Illicit Players
On Oct. 10, Alipay reiterated its anti-crypto stance in a Twitter thread, which warned that the company is closely monitoring over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations. Alipay wrote:
“If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.”
This move follows various reports that Alipay is being used for BTC transactions.
Binance Uses Alipay For Buying Crypto
On Oct. 9, major crypto exchange Binance confirmed on Twitter that it has begun accepting fiat currencies through online payment service Alipay and mobile messaging and payment app WeChat.
Binance CEO Changpeng Zhao, also known as CZ, clarified that the exchange is not working directly with WeChat or Alipay, and users are still able to use them for peer-to-peer transactions.
This announcement followed the implementation of Binance’s peer-to-peer trading for Bitcoin, Ether (ETH) and Tether (USDT) against the Chinese yuan (CNY) earlier, as reported by Cointelegraph.
China’s CBDC plans
Originally founded in China in 2017, Binance made its first strategic investment in Beijing-based crypto and blockchain publication Mars Finance in mid-September. At the time, the crypto community was anticipating the People’s Bank of China to launch its own central bank digital currency (CBDC).
However, in late September, the bank shattered these expectations — claiming that it has no specific launch date for its CBDC and denying that the country is ready to roll out the new financial asset.
Eyeing African Market, Binance Adds Nigerian Fiat-to-Crypto Gateway
Binance has added a fiat-to-crypto gateway for Nigeria’s Niara (NGN), the company said.
Facilitated by payments network Flutterwave, the addition starts a new phase of Binance adding sub-Saharan fiat pairs, the company said in a statement. In “the near future” the high-volume global exchange will also introduce gateways for South Africa’s Rand (ZAR) and Kenya’s Shilling (KES), Binance said.
At launch, Binance limited the Nigerian trading pairs to BUSD/NGN, BNB/NGN and BTC/NGN. Investors can deposit between 150 NGN (about $.40) and 430,000 NGN (about $1,200) for a 1.4% fee, Binance said in a blog post.
Binance said last month that it planned to add fiat-to-crypto OTC trading.
Binance Bitcoin Futures ‘Attack’ Sees FTX Exchange Face $150M Lawsuit
Cryptocurrency derivatives exchange FTX has received a $150 million lawsuit for market manipulation and selling unlicensed securities in the United States. Uploaded to social media by End of the Chain podcast host Samuel McCulloch on Nov. 3, sections of the lawsuit document show FTX accused of “attacking” fellow exchange Binance.
Lawsuit: FTX Had “Manipulative And Deceptive Scheme”
The plaintiff, a mysterious entity known as Bitcoin Manipulation Abatement LLC, is demanding $150 million in exemplary and punitive damages.
According to the plaintiff’s lawyers, FTX used accounts to manipulate Binance’s recently-launched Bitcoin futures in mid-September. The document reads:
“Defendants, and each of them, were caught red-handed when, at about 21:00 EDT on September 15, 2019, and acting in furtherance of the manipulative and deceptive scheme as alleged hereinabove, Defendants, and each of them, made two illicit unsuccessful attempts to manipulate prices of Bitcoin futures listed on Binance cryptocurrency futures exchange.”
The lawyers continue that Binance did not succumb to the attack due to its BTC prices being calculated using an index, securing it from small-scale attempts to move markets in such a way.
“The crux of the plaintiff’s argument is that FTX used its position to manipulate BTC prices using momentum ignition algos, with the goal of creating liquidation cascades,” McCulloch summarized.
Sister Company Ridicules “Nuisance” Lawsuit
FTX has yet to issue a public comment on the proceedings, which come as competitor BitMEX remains in the spotlight over a user data leak last week.
In a blog post on Sunday, Alameda Research, the quantitative trading firm which shares its CEO with FTX, revealed it was also the target of legal action.
“Although we have not been served, a complaint written by a patent lawyer against Alameda has been circulating on the Internet. The nuisance suit is riddled with laughable inaccuracies, including mistaking the entire business model of Alameda,” it stated.
Alameda further alleged it was the target of a smear campaign as its popularity grew:
“It is an unfortunate reality that it is easy to file bulls***lawsuits and annoying to fight them, and some assholes will use this as an excuse to extort anyone they see as high profile.”
Official: Binance Chain and BNB Will Be Traceable via CipherTrace
American blockchain security firm CipherTrace will provide Anti-Money Laundering (AML) controls for Binance Chain and its native asset Binance Coin (BNB).
CipherTrace To Increase AML checks On Binance Chain
Binance Chain, a public blockchain of major crypto exchange Binance and the underlying blockchain for Binance DEX, is expected to improve its AML procedures through CipherTrace, Binance announced on Nov. 5.
Specifically, CipherTrace will be providing Binance Chain with institutional-grade AML controls to increase adoption of the Binance Chain blockchain.
Within the initiative, CipherTrace will enable global developers, investors and regulators to access the Binance Chain blockchain for discovering data such as high-risk addresses.
Moreover, CipherTrace will be helping those entities to set various controls to protect decentralized applications, exchanges or other crypto-based applications, Binance wrote in its blog post.
Customer Data Will Not Be Shared With Third Parties, Binance COO says
Samuel Lim, chief compliance officer at Binance, claimed that the initiative will not affect Binance users’ security and data protection. Speaking to Cointelegraph, the executive noted that customer information will not be shared with third parties as a result of the new AML practice, adding:
“Users can rest assured that Binance will uphold its usual high standards of user security and data protection.”
Lim also denied to specify to Cointelegraph whether this move would affect listing of privacy coins such as Monero (XMR) in the future, saying that Binance does not comment on specific tokens and maintains the highest integrity in its listing due diligence process.
In the announcement, Lim considered the move as a “major win for the community-driven Binance Chain,” noting that Binance users can soon expect more digital token support across its ecosystem.
Meanwhile, online critics have outlined the third party disclosure risks associated with AML practices by companies such as CipherTrace and Chainalysis. Twitter account theonevortex wrote:
“Looking forward to chain analysis companies like @ciphertrace and @chainalysis getting hacked. These people sell your data to 3 letter agencies and governments WITHOUT your permission.”
CipherTrace Recently Expanded Its Platform To Support 700 Tokens
CipherTrace’s support for BNB and Binance Chain follows the recent expansion of CipherTrace services to up to 700 cryptocurrencies including Ether (ETH), Tether (USDT), Bitcoin Cash (BCH) and Litecoin (LTC) on Oct. 15. Claiming that CipherTrace has expanded to support 87% of the transactional volume of the top 100 cryptos, the firm denied to specify which cryptos will not be supported on the platform at the time.
On Oct. 21, CipherTrace CEO David Jevans argued that crypto regulations by global regulators such as those by the Financial Action Task Force’s would trigger a shift of criminal activity from Bitcoin (BTC) to privacy coins.
Binance CEO: New Wallet Security Solution ‘Far Superior’ To Multi-Sig
The CEO of Binance claims that a newly open-sourced solution for wallet providers and custodians is “far superior” to multi-sig security and will reshape the industry. In a tweet published on Nov. 6, Changpeng Zhao linked to a new open-source release from Binance, declaring:
“I believe TSS (threshold signatures scheme) will reshape the landscape for wallets and custodian services. It is far superior to multi-sig.”
Unlike Multi-Sig, TSS Is Implemented Off-Chain
Binance has today released an open-source implementation of its Threshold Signature Scheme (TSS) library for Elliptic Curve Digital Signature Algorithm (ECDSA): in layman’s terms, a new cryptographic protocol for distributed key generation and signing that will reportedly help wallet providers and custodians to avoid single points of failure in private keys within distributed key management.
As The Exchange Explains:
“TSS allows users to define a flexible threshold policy. TSS technology allows us to replace all signing commands with distributed computations so that the private key is no longer a single point of failure.
For example, each of three users could receive a share of the private signing key, and in order to sign a transaction, at least two of the three users will need to join to construct the signature.”
TSS is implemented off-chain, unlike multi-signature protection, thereby using fewer resources and reducing potential attack surfaces.
Binance claims that threshold signatures will mean that a single compromised device won’t put a user’s assets at risk. For business operators, it can help to cement access control policies that purportedly prevent both insiders and outsiders from stealing corporate funds.
More information about TSS technology is available via the Binance Academy, with the open-source code accessible via GitHub.
Cybersecurity Firm Kudelski Appointed As 3Rd-Party Auditor
Binance invited cybersecurity solutions provider Kudelski Security to conduct a third-party audit of the cryptography and code in the Binance TSS library, which reportedly found that “none of the issues found in the frame of this audit could be exploited” to “completely break the security of the scheme, or recover secret data.”
Kudelski entered a strategic partnership with smart contracts auditing firm Hosho earlier this year to combine their skill sets in order to meet the increasingly complex security demands of the blockchain sector.
Binance Enters Indian Market With Acquisition of Crypto Exchange WazirX
Binance has made a move into India’s potentially huge, but troubled, cryptocurrency market with the acquisition of the WazirX exchange platform.
Binance, the top crypto exchange by trading volume, announced the news in a blog post Thursday, but did not provide details of the deal. However, sources of the Economic Times estimated the firm was bought out for $5 million–10 million.
The company’s entry into India might at first glance seem surprising, with the local crypto industry having been greatly disrupted by a ban on banking services for crypto firms instigated by the nation’s central bank in April 2018. Since then a number of local exchanges, including Koinex and Zebpay, have been forced to close, with the remainder moving to survive on crypto-to-crypto trading, and avoiding the fiat system.
That’s a strategy employed by WazirX , which launched earlier this year offering crypto-to-crypto and peer-to-peer trades, says the Economic Times.
Binance, however, has a way round the banking issue, having launched Indian rupees on its Binance Fiat Gateway in recent weeks. Now it says users of WazirX will soon be able to buy the tether (USDT) stablecoin with rupees via WazirX and use USDT to trade any cryptocurrency offered by BInance.com.
“The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthen the blockchain ecosystem in India as well as another step forward in achieving the freedom of money,” said Binance CEO Changpeng “CZ ” Zhao.
There’s another potential hurdle for Binance in India, with a government panel said to be mulling legislation that would ban cryptos completely in the country. It would seem that Binance considers that a risk worth taking and, if the estimated acquisition price is in the right region, it’s likely a small amount for the firm to pay to have a foothold as one of few fiat-to-crypto exchanges in the potentially huge market.
“Building fiat-to-crypto bridges remain a key mission for Binance, and WazirX will help this by providing a simple and cohesive way to purchase cryptocurrencies in a country which is home to more than a billion people,” said Binance CFO Wei Zhou.
Markets Crash After Reports That Binance’s Shanghai Office Closed in Crypto Crackdown
Chinese authorities have reportedly raided and shut down the Shanghai offices of leading cryptocurrency exchange Binance.
Citing unnamed local sources, The Block says that local police have shut down Binance’s offices after raiding the premises. Between 50–100 of the exchange’s employees reportedly worked out of the Shanghai location.
Binance has not responded to Cointelegraph’s requests for comment as of press time.
Closure Follows Crackdown
The purported raid follows a crackdown on cryptocurrency-related businesses and activities in the country.
Recently, financial authorities in China issued a notice to the public, directing individuals to report businesses engaged in virtual asset trading to the Shanghai headquarters of the People’s Bank of China — the country’s central bank. Activities that must be reported include:
“Virtual currency transactions in the territory; the other is to issue ‘xx coins’ and ‘xx’ in the form of ‘blockchain application scenarios.’ Currency, fundraising or bitcoin, virtual currency such as Ethereum; third, providing services such as publicity, diversion, agency trading, etc. for registered ICO projects, virtual currency trading platforms, etc.”
However, Binance told Cointelegraph that the company had not received this notice. Similarly, Beijing-founded Huobi told Cointelegraph that the company was familiar with the notice, but had not received it.
Offices Are An Outdated Concept?
In a move of regulatory arbitrage, Binance opened offices in Malta in 2018 as the island nation ramped up its cryptocurrency-friendly regulatory projects.
Last month, rumors abounded that the exchange was opening offices in the Chinese capital of Beijing, despite the country’s decidedly anti-cryptocurrency stance.
However, according to the firm’s CEO Changpeng Zhao, offices themselves are an antiquated concept. In a tweet on Nov. 19, Zhao said, “Office and HQ are old concepts like SMS and MMS. Time is moving on…”
Markets react with major coins seeing red
Cryptocurrency markets have reacted to the news, with most major coins seeing significant losses on the day.
Bitcoin (BTC) is seeing losses over 6% while leading altcoin Ether (ETH) has lost over 8% in the last 24 hours. Altcoins like Litecoin (LTC) and EOS are taking a beating with over 9% losses, while Binance’s own coin, Binance Coin (BNB), is down 10% at press time to trade at $16.58.
Binance CEO: ‘We Will Be Suing’ The Block Over China Police Raid Story
The CEO of cryptocurrency exchange Binance has vowed to sue industry media outlet The Block over alleged false reporting.
In an ongoing Twitter exchange on Nov. 22, Changpeng Zhao, known as CZ in crypto circles, promised to take legal action over an article that claimed Binance’s Shanghai office was receiving attention from Chinese police.
CZ To The Block: “Own Up And Apologize”
“We will be suing them,” he wrote in one tweet.
The offending piece originally surfaced on Friday and was part of multiple reports of a fresh crypto clampdown by China. At the same time, Bitcoin (BTC) slid to below $7,000.
The Block initially made its claims under the headline “Binance’s Shanghai office shut down following visit by authorities, sources say.”
After a wide backlash over the factual accuracy of the article, during which CZ demanded the publication “apologize” but ruled out court action, The Block released a follow-up piece defending its stance.
This appeared to inflame tensions further, leading CZ to change his mind on the issue, which he originally said would be “a bit too much trouble for now.”
“Instead of apologizing to the community for the fake headline news of the non-existent ‘police raid’, which damaged our reputation, and $btc price, theBlock now tries to argue if there was an office, if CZ had a meeting… who cares? Own up & apologize for your mistake.”
Nonexistent Raids On Nonexistent Offices?
Specifically, CZ took The Block to task over its claims Binance encountered a police raid, and that it even had a Shanghai office at all. The latter issue remains unclear, the publication citing “witnesses” and previous media coverage, which CZ rejected.
Staff nonetheless changed the headline of the original article to remove reference to a “police raid,” instead claiming Binance received a “visit from authorities.” The URL of the article, which is still online, remains in its original form, including the “police raid” phrase.
During the Twitter storm, responses suggested The Block implicated Binance in a crackdown by Chinese authorities in Shenzhen, but that this was erroneous.
“Raided Chinese Exchanges are based in Shenzhen who explicitly dealt with CHINESE customers & involved ponzies. Binance and Bithumb were NOT raided,” content creator Boxmining countered.
Pressure Over $1M+ ‘FUD Fighting Fund’
By press time on Saturday, The Block’s cofounder Mike Dudas had joined in the quarrel with CZ after the latter suggested creating a dedicated fund to combat the practice of spreading so-called “fear, uncertainty and doubt,” or “FUD.”
On Twitter, CZ had seen interest from Justin Sun, CEO of blockchain platform Tron (TRX), and matched his pledge to donate 100 BTC ($716,000) to the fund. For Dudas, this was an attempt at stifling press freedom.
“Two of the wealthiest men in cryptocurrency plan to raise a ‘FUD fighting fund’ worth more than $1 million, presumably to wield as an implicit threat against journalists who report facts that run contrary to their business interests,” he wrote.
Cointelegraph has reached out to Binance for comment but had not received a response by press time.
Binance Returns Frozen BTC After User ‘Promises’ Not To Use CoinJoin
Bitcoin (BTC) users who employ privacy tool CoinJoin to add anonymity to their transactions face a major wake-up call after exchange Binance froze a withdrawal.
In an ongoing Twitter debate which began Dec. 19, a user by the name of Catxolotl uploaded what appeared to be correspondence from Binance Singapore staff stating they had launched an “investigation” into a withdrawal of an unknown amount of BTC.
Binance: We “Do Not Tolerate” CoinJoin
The Reason, They Said, Was Catxolotl Was Using Coinjoin Via Wallet Provider Wasabi. A Binance Representative Confirmed The Problem In Private Comments, Explaining:
“Binance SG operates under the requirements as set forth by MAS and our MAS regulated partner, Xfers. Hence there are AML CFT controls set in place for the Binance SG. Unfortunately, this user has triggered one of our risk control mechanisms and thus we are conducting a deeper investigation.”
CoinJoin refers to a method of grouping together Bitcoin transactions, “mixing” unspent transaction outputs (UTXOs) and hiding who sent what to which address in order to increase all users’ privacy.
According to Binance, including CEO Changpeng Zhao (known as “CZ”), Singapore regulations meant CoinJoin transactions were no longer desirable.
“However, at this juncture, Binance Singapore does not tolerate any transactions directly and indirectly associated with gambling, P2P, and especially darknet/mixer sites,” a subsequent email allegedly reads.
Catxolotl Confirmed He Had Received Possession Of The Funds Following The Debacle:
“Update: I got my sats back, but not without promising Big Brother I wouldn’t mix those utxos. Hope everyone got something out of this.”
Beyond Anyone’s Control?
As neither Binance nor CZ prepared to apologize for what they saw as abiding by local laws, a fierce debate erupted on social media, with well-known Bitcoin figures clashing over the decision to root out transactions with enhanced privacy.
“Some advocate using CoinJoin as a ‘best practice’ but they do not necessarily inform you on the risks,” the @Bitcoin Twitter handle wrote, tagging self-confessed “Bitcoin maximalist” Giacomo Zucco.
The Account Continued:
“FYI, a risk of using CoinJoin is @chainalysis or others will increase your ‘risk score’. @binance & others use these vendors & share data.”
Zucco responded in kind, highlighting the industry’s mixed feelings on what remains a serious challenge as more consumers choose to engage with Bitcoin.
“Some advocate NOT using CoinJoin as a way to please bureaucrats & politicians, but they do not necessarily inform you on the risks,” he wrote.
“FYI, a risk of NOT using CoinJoin is being spied on by everybody, including kidnappers, extortionists, stalkers, competitors & crazy ex-wives.”
The controversy extended to Wasabi and CoinJoin itself. Nicolas Dorier, the creator of open-source Bitcoin payment gateway BTCPay, hit back at suggestions Wasabi could control how its transactions were handled by exchanges.
“Any person saying that @wasabiwallet have any technical way to prevent their users to be harassed by binance is full of sh*t. No coinjoin scheme can prevent this at the moment,” he wrote.
CZ has meanwhile released a dedicated blog post about the nature of the regulations with which Binance is obliged to comply.
Binance US Now Offers Staking Rewards For These Two Cryptocurrencies
Binance US has joined other major exchanges in the staking game, adding staking rewards for cryptocurrencies algorand (ALGO) and cosmos (ATOM).
Announced Wednesday, the exchange said returns will be given on a monthly basis.
ALGO and ATOM are the only proof-of-stake (PoS) cryptocurrencies currently available on Binance US, a California-based licensee of one of the world’s largest cryptocurrency exchanges.
Binance US now joins Kraken and Coinbase in offering staking rewards on PoS coins, though the latter two exchanges only offer staking on Tezos (XTZ).
Binance US currently offers 28 cryptocurrencies on its platform. With U.S. compliance laws remaining a top concern for the Binance offshoot, the firm says it’s waiting for further regulatory clarity on Tezos. Binance US CEO Catherine Coley told CoinDesk the exchange hopes to offer additional staking rewards once more PoS assets are listed.
An expected return per coin was not included in the Binance US announcement. Tezos staking returns on both Kraken and Coinbase run at roughly 6 percent, according to network figures.
An alternative to proof-of-work (PoW) mining, staking encourages cryptocurrency holders to participate in the network by depositing their coins in specialized public addresses. Users compound holdings through disbursed network rewards for verifying transactions while bolstering the network’s overall security.
Launched in September 2019, Binance US was launched to cater to U.S. citizens following Binance proper’s booting of U.S. customers earlier that summer.
Mysterious ‘Binance Cloud’ Launching In 10 Days, CEO CZ Hints
In a wide-ranging ask-me-anything (AMA) on Feb. 7, Binance CEO Changpeng Zhao announced big plans for the cryptocurrency exchange in 2020. One of the most imminent and least explained was the hinted arrival of a new product called Binance Cloud, which will reportedly be unveiled in the next 10 days.
Taking Binance Into The Cloud
Exactly what Binance Cloud might entail was not explained, as Zhao remained tight-lipped during the AMA. However, the company is currently advertising for a Senior Cloud Engineer, to join the Cloud Engineering and Architecture Team.
The position describes “large scale, massive parallel and highly available compute[r] systems on the advanced Cloud Computing platform,” and requires someone who can “improve, scale and automate this business critical Cloud-based architecture.”
How this translates into a consumer product remains unclear, although seemingly the answer is just days away. Zhao followed up the AMA by tweeting a GIF of some clouds, to increase the speculation.
Other upcoming and recent developments
Even before that, we will see BNB futures with 50x leverage launched on Feb. 10. Binance is also adding fiat gateways for currencies including Russian Rubles, Norwegian Krone and Croatian Kuna, with cryptocurrency purchases already available with Russian credit cards.
As Cointelegraph reported, WazirX, the Indian cryptocurrency exchange acquired by Binance, also recently held a successful Initial Exchange Offering, also known as an IEO, for its WRX coin through Binance launchpad.
Continuing Its Crypto Market Takeover, Binance Fires Up BNB Futures
Crypto exchange unicorn Binance will launch Binance Coin (BNB) futures trading on Feb. 10.
As the 17th cryptocurrency available on Binance’s futures trading branch, BNB comes with 50x leverage, paired against Tether’s USDT stablecoin, Binance detailed in a Feb. 7 press release provided to Cointelegraph.
BNB Pumped With The Rest Of The Market
Binance’s BNB coin has already rallied several dollars this month, hitting a price of $22.16 by press time. Cointelegraph analyst and trader Keith Wareing sees upcoming demand for the BNB asset itself.
“Looking at trading volumes on Binance, it’s clear they don’t have to sell any of their s***coin for revenue,” Wareing said in a Telegram message, adding:
“As such, during the forthcoming bull run, their position as one as one of the most trusted and secure exchanges in the space guarantees to add demand to the BNB token, so I expect it to outperform all other top 10 assets if the Bitcoin bull run continues.”
Digital asset trader and social media personality Crypto Dog suggested it was pro-BNB in a Feb. 7 tweet, saying, “Anybody else like BNB?” The crypto-Twitter crowd posted a mixed bag of positive and negative reviews in response.
Binance Grew Quickly
Binance got popular quickly after its 2017 launch. By summer 2018, the exchange saw more than $1 billion in single day trading volume. Binance shortly after collected $78 million of profit in the first quarter of 2019.
The business continued its expansion throughout the first half of 2019, funneling millions of dollars in volume through its Binance Launchpad for various initial exchange offerings, or IEOs.
Several months prior to its futures trading platform launch, however, Binance banned U.S. customers. Since the ban, the exchange has opened up a U.S. branch, as well as grown its futures trading platform, hosting Bitcoin futures with 125x leverage, which is substantively faster than others.
This new offering comes on the heels of releasing Zcash (ZEC) futures trading earlier this week.
Binance Cloud To Allow Users To Launch A Crypto Exchange Within 5 Days
Binance’s newly released Binance Cloud platform might be somewhat different from what the crypto industry expects the new feature to be.
After Binance founder and CEO Changpeng Zhao (CZ) first hinted at the introduction of Binance Cloud on Feb. 8, the new service has been officially released on Feb. 17, targeting users willing to set up crypto exchanges, according to a blog post by Binance.
All-In-One Infrastructure For Launching A Crypto Exchange
According to the announcement, Binance Cloud will serve as an all-in-one infrastructure platform for customers and partners to launch digital asset exchanges based on Binance’s industry-leading technology, security, liquidity as well as custodial services.
The solution also supports dashboard for managing funds, multilingual functionality, as well as a range of trading pairs and coin listings.
The Binance’s new exchange-specific cloud solution will provide users with a method of setting up a crypto platform in their local markets. Binance Cloud’s features include crypto spot market and futures trading as well as local bank API integrations and peer-to-peer exchange services from fiat to crypto, the announcement notes.
In the future, Binance Cloud plans to add more features like staking, over-the-counter trading services as well as token issuance with initial exchange offering platform.
CZ Says That Binance Cloud Will Allow Users To Launch An Exchange Within Three To Five Days
Speaking about Binance Cloud in an interview with Cointelegraph, CZ outlined that the new service will particularly target people in regions that are not yet covered by Binance. CZ said that Binance Cloud will allow those people to run their own exchanges in local markets that are far from Binance “both fiscally and also culturally or just knowledge-wise” to date.
The Binance CEO also told Cointelegraph that Binance Cloud would allow any partner to launch an exchange within three to five days in case if “other preparations are in order.” According to the original announcement, the first major digital asset exchange fully powered by Binance Cloud will launch in early March 2020.
Binance Cloud Comes In Line With Binance’s Mission To Unlock Crypto For Everyone
CZ Also Pointed Out That Binance Cloud Is The First Initiative Of Its Kind, Claiming:
“Binance Cloud is a product suite previously missing from the market […] We are eager to share the quality experience of Binance through different brands, communities, and markets globally.”
Speaking to Cointelegraph, CZ was unsure of who had initially conceived the idea of Binance Cloud, beyond the fact that it was not him. The Binance CEO added that the origin of the idea is not as important as execution. CZ stressed that Binance Cloud aims to enable everyone to access crypto and contribute to global adoption. CZ said:
“We want to enable more of our partners to access crypto, so that other people can do this together with us in enabling people to access crypto. So the concept behind Binance Cloud is that we want to provide a platform where other people can help us enable access to crypto. So that’s really the idea behind it.”
The news comes amid a recent report claiming that Binance has applied for a license to operate in Singapore. Originally based in Malta, Binance will now purportedly expand its regulatory compliance by acquiring a license from the Monetary Authority of Singapore.
On Feb. 16, Cointelegraph published an interview with CZ, in conjunction with the CEO winning the top position in the Cointelegraph’s first-ever Top 100 list.
White Label Exchange Provider AlphaPoint Raises $5.6 Million
New York-based white label exchange provider AlphaPoint has raised a further $5.6 million from investors to help scale its exchange technology.
AlphaPoint’s tech is currently used as the backend for 150 exchanges across 35 countries, servicing more than a million end users. The funding will be used for platform development and to roll out more sophisticated exchange features like margin trading, integrated advanced brokerage capabilities, and better liquidity solutions.
Co-founder And CEO of AlphaPoint Igor Telyatnikov Said These Features Are Just The Tip Of The Iceberg:
“Stay tuned in 2020 as we will soon announce the release of a series of new liquidity, leverage, and lending products and solutions to our customers.”
Two Year Gap Between Funding Rounds
This latest funding round comes two years after AlphaPoint drew in $15 million from Mike Novogratz’s Galaxy Digital Ventures in 2018 to grow its standing as a digital asset marketplace. In total, the company has raised $23.9 million since it was launched in 2013.
Telyatnikov described the infusion of capital as an effective short-term solution for their current needs:
“This capital injection enables AlphaPoint to continue delivering on our mission to enable access to digital assets globally. We are still in the early days of adoption and utilization of blockchain technology.”
Fresh Blood At AlphaPoint
The company is also adding two new members to their board of directors and advisory board. Tim Scheve, President and CEO of Janney Montgomery Scott, will join AlphaPoint as an advisor alongside Jan Mayle, founder and CEO of The Mayle Group.
Binance Announces CoinMarketCap Acquisition, CZ Gives The Scoop
While global markets are experiencing tough times amid the coronavirus pandemic, the crypto industry is getting stronger as its core players have tapped one of the biggest crypto mergers in history.
Binance, the world’s biggest cryptocurrency exchange, has reached an agreement to acquire CoinMarketCap, one of the most-referenced crypto data websites, in an undisclosed deal. The companies officially announced the acquisition to Cointelegraph on April 2.
Changpeng Zhao, founder and CEO of Binance, said that Binance and CMC are very similar, as they are both providers of “access-to-crypto” and share a vision of making crypto assets more accessible and useful for people around the world. Zhao said:
“The acquisition will enable us to build on each other’s strengths, and further grow and instill transparency in the industry.”
Zhao told Cointelegraph that the company has been in talks with CMC for a few months before closing the deal in April. While the acquisition is rumored to have cost Binance $400 million, Zhao said that the company cannot disclose the amount of the deal, as it is protected by a non-disclosure agreement.
CMC Will Operate Independently
While the companies are going to work closely together, CMC will still continue to operate as an independent business entity, both Binance and CMC emphasized. Zhao stressed that the acquisition will not change CMC’s independence from external stakeholders:
“Binance has no bearing on CoinMarketCap rankings. CoinMarketCap stays committed to providing the most accurate, timely and quality cryptocurrency data in the industry while benefiting from Binance’s expertise, resources and scale.”
However, CMC will immediately undergo some internal restructuring as part of the deal. Brandon Chez, CMC’s founder, will be stepping down as CEO and will be replaced by CoinMarketCap’s current chief strategy officer, Carylyne Chan, as interim CEO.
Apart from the reshuffle, CoinMarketCap will not see any changes in its team in the near future, or at least the next couple of months. Chan told Cointelegraph:
“Other than that, there won’t be any other major team changes at CoinMarketCap. Everyone is going to stay on and everyone is really excited about what’s happening. […] I think that no other major changes that we see, definitely not in the next couple of months.”
CoinMarketCap To Remain Neutral Regarding Project Listings
According to Chan, Binance did its best to ensure that CMC can continue to adhere to its own listing methodology. The interim CEO told Cointelegraph that the firm is not planning any sufficient listing changes anytime soon:
“We’ll stick to our listing requirements and make sure that everything is fair and unbiased to anyone who wants to list anything on CoinMarketCap. So that will be our firm commitment that […] will not change following the acquisition.”
So, What Does This Acquisition Really Mean?
While CMC will continue to operate independently to ensure neutral and transparent data, Binance will be contributing significantly to CoinMarketCap’s further development and projects in 2020, Chan noted.
The exchange, which has at least 800 employees worldwide, is expected to share its expertise in a number of areas like finance and security. Chan highlighted that the acquisition will help CMC evolve:
“We are going to get a lot from Binance in terms of understanding how they’re running a better team in terms of best practices. I think there are some really basic things around security, finance that we will learn from Binance just based on the fact that they have a way larger team than us and have scaled out much more efficiently.”
The CMC acquisition comes about six months after industry reports claimed that CoinMarketCap was “entirely bootstrapped” — i.e., continuing its operations with minimal financial resources. In October 2019, Chan reportedly said that CMC did not plan to raise any funds soon and was continuing “bootstrapping and scaling.”
CZ Says Binance Invested One Quarter of Its Profits Last Year
The chief executive of major cryptocurrency exchange Binance, Changpeng Zhao — often known as CZ — has revealed that the firm diverts a quarter of its profits into investment opportunities.
Zhao’s comments follow Binance’s completion of several recent high-profile acquisitions — including crypto data site CoinMarketCap and Indian crypto exchange WazirX.
In a recent interview with South China Morning Post, Zhao estimated that Binance reinvests roughly 25% of its annual profits into expansions and acquisitions.
“We usually spend about a quarter of our profit on investment opportunities every year,” Zhao said, emphasizing that Binance is currently looking to grow its portfolio of businesses “beyond just trading.”
With Binance estimated to have netted roughly $550 million in profits during 2019, the exchange is likely investing in excess of nine-figures annually.
Binance Secures High-Profile Acquisitions
The exchange has aggressively expanded its fiat gateways in recent months, currently supporting crypto purchases with credit cards in over 50 jurisdictions.
Zhao stated that Binance is “interested in exchanges that have existing banking relationships, which enable them to accept trading in local fiat currencies.”
In November, Binance acquired Indian cryptocurrency exchange WazirX to launch a fiat gateway for cryptocurrency purchases in Indian rupees. The decision turned out to be well-timed, with India’s Supreme Court repealing a ban on banks providing financial services to crypto businesses several months later.
At the start of April, Binance also acquired the popular market data provider and long-term crypto mainstay CoinMarketCap for $400 million.
Binance Rivals Bitmex For Top Derivatives Exchange By Volume
In addition to fiat gateways, Binance has also introduced a 125x futures platform.
Despite volume collapsing during the March 12–13 crash on Binance’s futures exchange, open interest has since recovered to the platform’s pre-crash levels.
Although Binance is a relative newcomer to the derivatives sector, the exchange has quickly captured significant market share — vying with BitMex for the title of the top platform by volume.
After Steem Voting Controversy And Hardfork, Binance Lists HIVE
Binance has launched support for HIVE the month after the exchange participated in a controversial governance vote that sparked the Steem hard fork.
In response to customer demand, leading cryptocurrency exchange Binance launched trading support for the community-led Steem (STEEM) hard fork Hive (HIVE) on April 27.
HIVE can now be traded against Bitcoin (BTC), Tether (USDT), and Binance Coin (BNB), however, withdrawals and deposits will not go live until April 29.
While Huobi’s recently introduced support for HIVE skyrocketed the token’s price over 600% in three days, Binance’s announcement appears to have resulted in a bearish pull-back — with HIVE dropping 20% from $0.95 to $0.75 over the past 11 hours.
Binance Lists HIVE After Voting Controversy
The announcement comes the month after Binance and Huobi mobilized customer funds to support Tron founder and new Steemit Inc owner Justin Sun’s apparent attempted takeover of the Steem network — ousting Steem’s block validators in favor of Sun.
However, the exchanges claimed that they were misled by Justin Sun as to the nature of what they were voting on, and quickly withdrew their votes. CZ claimed that he had been made aware of an upcoming upgrade that he had supported.
In Later Statements, CZ Admonished Sun, Saying:
“Justin didn’t talk to me about it actually. My internal team said it was a necessary network upgrade, so I said go ahead. There are network upgrades all the time, and we are always supportive.”
CZ continued, saying: “I told him already directly, explain what you are trying to do to the community and get support first, then do it. Transparency works.”
Apparent Takeover Sparks Resignations From Steem
In an interview with Cointelegraph, OpenOrchard CEO and former Steemit Inc head of communications, Andrew Levine, stated that the situation where Huobi and Binance supported Sun’s takeover comprised the catalyst for his resignation.
“It became intolerable once we saw what happened with the exchanges. That was a black swan event for us,” Levine said, continuing:
“When I saw that the exchange had gotten involved in governance and not just one exchange, once we saw that, it really shattered our conception of the blockchain space. It really had a massive impact on us.”
Former Steem Developer Is Willing To Put Past Behind Him
When Asked How He Would Feel About HIVE Being Listed On Huobi And Binance, The Developer Said:
“I have no problem with Hive being listed on those exchanges — you always want your tokens on exchanges, there are customers there, there are people who want your token — you want your users to have options.”
Levine noted that the situation comprised an “extremely rare event,” also acknowledging that Steem’s “confusing” Delegated Proof-of-Stake governance model played a part in facilitating the takeover. He said:
“When you have exchanges out there where the executives are overseeing hundreds of tokens, each with their own crazy governance models, it should have been taken into account at launch, ‘hey, people aren’t going to understand the nuances of this.’”
CZ Blames ‘Self-Perceived Competitors’ For New DDoS Attacks On Binance
The world’s largest crypto exchange, Binance, faced a series DDoS attacks on its Chinese domains on April 29.
The world’s largest cryptocurrency exchange, Binance, has faced a series of distributed denial of service, or DDoS, attacks on its Chinese domains earlier today.
Binance CEO and founder, Changpeng Zhao, or CZ, tweeted about the attacks on April 29. He explained that the DDoS attacks caused “some lag and interruption of network access.” Binance CEO reassured that there is no need to be concerned, noting that systems are stable and user funds are safe.
Binance co-founder Yi He Reportedly Alerted The Issue Earlier Today
In the tweet, CZ also suggested that the new DDoS attacks on Binance were triggered by “self-perceived competitors.” He wrote:
“Based on the attack pattern, it looks like work of our self-perceived competitors.”
CZ subsequently tweeted that Binance has white hackers that work on internal testing to maintain security of the platform. In response to a tweet noting that global tech giants like Google and Facebook hire such hackers to find loopholes in their security systems, CZ wrote:
“We of course do. We also have self-perceived “competitors” doing testing for us. Everyone is working on Binance.”
According to a report by crypto news agency, CoinNess, the DDoS attack was first flagged by Binance co-founder, Yi He, early in the day. Binance appears to have made no official statement on the matter as of press time.
Binance declined to provide more information about the attacks to Cointelegraph.
The news follows DDoS attacks on major crypto exchanges, OKEx and Bitfinex. As reported, both exchanges experienced multiple DDoS attacks in February, causing some major system outages. OKEx CEO, Jay Hao, subsequently blamed unnamed competitors for the attack. The platform reported that the DDoS attacks were “properly handled within a short period of time and no overseas client is impacted.”
As reported by Cointelegraph, the attacks on OKEx and Bitfinex in February could possibly be related.
Is Binance Getting Too Big? CZ Responds
In an exclusive interview with Cointelegraph, Binance founder CZ responded to concerns about the size of his company.
Cointelegraph conducted an exclusive interview with Binance founder and chief executive, Changpeng Zhao, or CZ, during Virtual Blockchain Week.
During the discussion, CZ addressed concerns from the crypto community regarding the size and influence of Binance amid the firm’s increasing acquisitions and horizontal expansions.
CZ: ‘The Free Market Works’
On the topic of Binance’s increasing presence within the crypto ecosystem, CZ stated: “I think basically there’s two sides to it.”
“So there’s the worry about are we too big or not, and then there is why are users choosing us? If we abuse the power that we have, and then abuse our influence, then people would not choose us.”
“So we are quite big, but the reason we’re growing is not because we are abusing a monopolistic power,” he stated, adding: “There’s like thousands of other exchanges, the competition is very fierce.”
“People naturally have those kinds of worries. But rest assured, we want to continue to provide value to his users, not destroy value. And the free market works — if we abuse it, people will leave.”
Binance Is ‘Tiny’ Compared To Tech Giants
CZ also asserted that “Binance is still very small, stating: “in terms of market cap compared to any traditional organization, we are tiny.” He continued:
“Even in terms of the number of users where we’re tiny as well — all of the crypto users combined is like one one-thousandth of traditional populations, and there are much larger organizations which take one-third of the population, like Facebook.”
“In a free market, […] people will naturally gravitate toward the guys who are providing better products, better services,” he concluded.
‘Sometimes You Get Lucky’
During CZ’s fireside chat with the hosts of Virtual Blockchain Week, CZ stated that he never expected to ascend to comprise the top-ranked crypto exchange so quickly — with Binance having risen to become the largest exchange by trade volume within six months of its launch in 2017.
CZ stated that when the platform launched, there were “only two crypto-to-crypto exchanges that were big at the time — they were only English, and only on the web.” With no mobile apps and no major exchanges targeting users outside of the West, CZ stated that he “thought there was definitely room for another exchange.”
“At the time, our goal was ‘let’s try to reach number one in three years’ […] But y’know, sometimes you get lucky.”
Why Binance’s New Debit Card Fails To Fulfill Satoshi’s Vision
Binance’s debit card process makes it a more of a centralized bank-like institution than the decentralized tech dreamed by Bitcoin’s creator.
Satoshi Nakamoto years ago envisioned an ecosystem that would be independent of the centralized financial system that dominates the global economy today.
His creation sparked a global community of enthusiasts and an entire industry surrounding blockchain — the solution enabling individuals to turn their money away from centralized legacy institutions and toward transacting on a decentralized, distributed ledger. The ultimate goal was a world in which people could pay for goods and services with these novel financial instruments.
Many payment companies and exchanges already claim to offer services that enable crypto users to buy goods and services with cryptocurrency.
Upon further analysis, however — like with Binance’s new debit card offer — it’s clear their crypto payment solutions don’t deliver on the blockchain, adding more intermediaries and opening users to the same harm that could befall them digitally using traditional payment methods.
How The Crypto Payment Process Works
Currently, there are two mainstream methods of processing a cryptocurrency-fiat transaction. One method involves the intermediary accepting cryptocurrency and converting it into fiat at a locked-in, instantaneous exchange rate and then delivering fiat to the merchant or vice versa.
The second method involves first liquidating the user’s crypto into fiat in the user’s account before it reaches the intermediary and then sending the fiat payment to the intermediary to complete the transaction. The first method takes place on the blockchain, while the second does not.
Numerous payment platforms offer one of the two aforementioned types of transactions. Even the giants are mulling over jumping into the game. PayPal has weighed the idea lately of offering crypto payments to consumers, which could lead the way to increased stabilization of the volatility often associated with Bitcoin (BTC) and other cryptocurrencies.
But it remains to be seen exactly how these payment providers plan to process the transactions — whether they would technically allow consumers to pay in crypto or in fiat on or off the blockchain. That’s an important difference to crypto users.
What Crypto Users Want, And What Binance’s Card Offers
Crypto enthusiasts, as well as regular consumers who like to pay in crypto, value the secure nature of blockchain, which, on top of the clear security benefits, doesn’t include the hidden administrative feeds that credit cards do, such as chargebacks or non-purchase credit card fees.
There are also personal reasons consumers choose to purchase with crypto: the advantage of having full control of their money on a blockchain, an element that is arguably missing from non-blockchain means of storing or transferring financial assets where banks have control.
This is the foundation and spirit of cryptocurrency ownership for many crypto users. Some crypto payment solutions available to crypto users, however, have diminished this foundation by the way in which they execute transactions.
Most recently, Binance announced a partnership with Swipe, in essence acquiring the company. Through the acquisition, Binance account holders can now be issued a Binance-branded Visa card. Binance’s Changpeng Zhao, also known as CZ, explained:
“To achieve our mission of making crypto more accessible to the masses, off-ramps are a key component as well. By giving users the ability to convert and spend crypto directly, and have merchants still seamlessly accept fiat, this will make the crypto experience much better for everyone.”
According to the company’s marketing, the card can then be used to purchase goods or services from merchants that accept Visa, giving the impression that the consumer is paying the merchant with cryptocurrency — but there’s a catch.
Upon deeper analysis, it’s clear the account holders are not really buying anything with cryptocurrency nor are they making the purchase on the blockchain. This payment method only makes it appear as though the consumer is paying using cryptocurrency. In actuality, the charge is to the customer’s fiat account.
A source close to Binance explained that if the fiat account is empty, Binance’s system converts cryptocurrency from the user’s crypto account into fiat currency.
The converted fiat currency is then deposited into the fiat account and used to make the purchase with the Binance debit card. In the transaction, Binance sends the converted fiat currency to the card company to complete the payment process. So, technically, the payment never truly involves paying with crypto or on the blockchain.
Why Binance’s Card Offer Causes Crypto Contradiction
There are two conceptual problems here. First, the crypto liquidation process into fiat currency through Binance, which is similar to banking mechanisms, is out of the control of the user, negating the foundational spirit of owning cryptocurrency instead of holding cash at a bank — not to mention the unnecessary redundancy it creates by adding Binance, Swipe and Visa as additional intermediaries in the transaction process.
Second, by sending the payment through traditional credit card rails that are not on the blockchain, the user loses the security benefits of paying on the blockchain. Essentially, the whole process places Binance in a sort of bank-like position rather than a facilitator of payment between the user and the merchant, which is what Visa or Mastercard serve in this example.
To satisfy the crypto community’s hunger for a truly decentralized digital currency, users need to know they are paying in crypto, and not be deluded by the promise of it. This means crypto payment platforms need to ensure they are accepting the payment as crypto and not converting the crypto to fiat before sending payment to merchants — an act that undermines the element of transaction transparency to the user.
The most cryptocurrency-user-friendly approach would involve accepting cryptocurrency and instantly locking in a rate that the user will see before paying. Such a mechanism would restore transparency and grant the user full control of the digital currency, while also ensuring that the transaction stays on-chain, thereby reaping its benefits.
These may seem like negligible details, but to a cryptocurrency owner, it can make a world of difference.
The entire reason for which users get into crypto revolves around control of the currency and the multitude of benefits of running transactions on a blockchain for both the consumer and merchant. For exchanges and crypto payment providers, the key is to stick to the crypto and blockchain way, rather than creating an illusion. This is true to Satoshi’s vision.
Binance CEO Denies Allegations That The Exchange’s US Arm Is A Regulatory Decoy
“Binance has always operated within the boundaries of the law,” said CZ.
Changpeng Zhao, CEO of Binance, is pushing back hard against allegations that the crypto exchange set up its U.S. arm to circumvent regulations and surreptitiously profit from investors.
According to an Oct. 29 article from Forbes writer Michael Del Castillo, the news outlet claims to have obtained a leaked presentation outlining Binance’s plans for operating in the United States. The document states that in 2018 — prior to the launch of Binance.US — the crypto exchange intended to set up a “Tai Chi entity” in the U.S. to act as a type of regulatory lightning rod protecting its main operations from enforcement.
“While the then-unnamed entity set up operations in the United States to distract regulators with feigned interest in compliance, measures would be put in place to move revenue in the form of licensing fees and more to the parent company, Binance,” stated Castillo. “All the while, potential customers would be taught how to evade geographic restrictions while technological work-arounds were put in place.”
In a response made roughly an hour after the article’s publication, Changpeng Zhao, or CZ, disputed many of the claims, stating that the source — the leaked document — was “not produced by a Binance employee.” Castillo believed that former employee Harry Zhou created the presentation.
“Binance has always operated within the boundaries of the law,” stated the CEO. “We do not acknowledge the alleged document.“
CZ claimed that the fact the firm has opened exchanges in several countries is evidence it is willing to comply with regulatory framework “with proper licensing and applications” and stated Binance “has very strong collaboration with many notable law enforcement agencies worldwide.” He said Binance’s operations in the U.S. have “very strong restrictions and operating procedures in place.”
However, the Forbes report described parallels between this Tai Chi plan purportedly conceived in 2018 and the trajectory of Binance.US, which launched in September 2019. The exchange currently operates in 40 U.S. states.
Castillo stated the document suggested the business entity participate in the U.S. Department of Homeland Security Cornerstone Program for detecting weaknesses in the financial systems to “distract” agencies including the U.S. Treasury Department’s Financial Crime Enforcement Network, or FinCEN, and Office of Foreign Assets Control, or OFAC, the Securities and Exchange Commission, or SEC, the Commodity Futures Trading Commission, or CFTC, and the New York Department of Financial Services, or NYDFS. According to Forbes, Binance’s United States arm did so.
The ownership structure of Binance.US, operated by BAM Trading Services in San Francisco, is also somethingof a mystery.
CEO Catherine Coley has claimed there are no ownership ties to Binance — CZ himself called Binance.US “a standalone marketplace” — but Castillo reported the leaked document stated BAM would continue to “license trading and wallet technology” from the crypto exchange.
The presentation also purportedly called for the business entity to use virtual private networks, or VPNs, to obscure the locations of crypto traders and bypass existing regulations. Citizens living in ten U.S. states can not legally use Binance.US at the time of publication, yet Binance Academy has a beginner’s guide to VPNs on its website. CZ has also advocated for the technology on Twitter.
Responding to the claims on Twitter, CZ stated “Anyone can produce a ‘strategy document’, but it does not mean Binance follows them.”
Binance Recovers $344K From Scam DeFi Project Launched on Its Platform
Cryptocurrency exchange Binance says it has successfully followed the money trail left by the operator of a scam decentralized finance (DeFi) project and recovered nearly all the stolen funds.
* In an announcement provided to CoinDesk on Thursday, Binance said it has gained custody of an estimated 99.9% of $345,000 worth of cryptocurrency stolen by purported automated market maker Wine Swap in October.
* Having raised the funds at launch on Binance Smart Chain in October, the operator fled with users’ cryptocurrency “within an hour,” Binance said.
* The so-called exit scam was executed by moving the 19 different cryptocurrencies held in Wine Swap’s address “0xa1eaB5F255DD77fED0D8ea81748422ca7ab0eDc4” to a personal address belonging to the bad actor: “0x4BA023aA9196a354C008aD595F67e268420b7005”.
* The various coins were moved via cross-chain transfers from Binance Smart Chain to Binance Chain and then to Ethereum, according to Binance.
* A small portion of the funds was moved to two exchanges, as well as Binance Bridge, a service that provides access to inter-blockchain liquidity for decentralized applications on Binance Chain and Binance Smart Chain.
* The Binance said its security team closely followed the transactions and managed to identify the malicious actor. By then, the scammer had nearly converted all of the funds into stablecoins, as well as Binance coin (BNB), ether (ETH) and Chainlink’s LINK token.
* After being contacted by Binance, the scammer returned the funds to the exchange.
* “Analysis of the transfers to and from Wine Swap allowed us to identify which addresses fell victim to the scam and calculate exactly how much was owed to them,” the exchange said.
* Binance now plans to refund the victims’ addresses “within the next several days.”
* Binance had seen some criticism over the fact that the scam project was launched on its platform.
CoinDesk asked the exchange if it had reported the scammer to law enforcement, but a reply hadn’t been received by press time.
Crypto Exchange Binance Says Its Systems Are Under Stress
Binance, the world’s largest cryptocurrency exchange by volume, said a rush of new users put its systems under stress, forcing it to briefly suspend withdrawals.
Chief Executive Officer Changpeng Zhao said that user sign-ups and trades jumped to a record high. Crypto prices surged on Friday after Tesla Inc. founder Elon Musk added a reference to Bitcoin to his Twitter profile and posted a mock magazine cover of a whippet in a red sweater, which users interpreted as a sign of support for Dogecoin.
“We almost ran out of DOGE coin addresses,” Zhao told Bloomberg. “Our system couldn’t generate new addresses fast enough to match new users coming in. It’s crazy.”
Binance’s corporate Twitter account later posted that all backlogs had been cleared and withdrawals were back to normal.
Customer funds were safe and kept in the Secure Asset Fund for Users, an emergency insurance fund stored in a separate cold wallet, Binance said. The exchange allocates 10% of all trading fees received into the fund as a way to protect client money in extreme cases.
Binance Faces CFTC Probe Over US Customers Trading Derivatives
The agency hasn’t accused Binance of any wrongdoing, according to the Bloomberg report.
Binance is being investigated by the Commodity Futures Trading Commission to determine if U.S. residents traded derivatives on the cryptocurrency exchange in violation of U.S. rules, Bloomberg reported.
Binance hasn’t been accused of any wrongdoing and the CFTC may not bring an enforcement action, according to the report, which cited people familiar with the matter. Bloomberg also did not outline a time period for this alleged trading.
Spokespeople for Binance and the CFTC did not immediately return requests for comment. However, in a tweet posted after Bloomberg’s report ran, the exchange’s founder and CEO, Changpeng Zhao, appeared to call the report “FUD,” using an acronym for “fear, uncertainty and doubt” that is often used to refer to unwelcome news in the crypto industry.
The news comes a day after Binance announced it has hired Max Baucus, a former U.S. senator and ambassador to China, as a policy adviser who would be able to navigate the exchange’s relationship with U.S. regulators. Baucus currently operates a consulting business.
Binance does not directly serve U.S. customers on paper, instead using a San Francisco-based entity operating as Binance.US for that purpose. Despite this, the parent exchange has announced at least twice in two years that it would be removing all U.S. customers from its platform.
The probe is another sign regulators are trying to funnel U.S. investors into regulated channels.
Derivatives trading in the U.S. is strictly overseen by the CFTC. The agency brought an enforcement action last year against BitMEX, also on allegations it allowed U.S. customers to trade derivatives products. That case, which is also being pursued by the Department of Justice, is ongoing.
Binance Launches Tradable Stock Tokens In Tesla
As distinct from traditional shares, a stock token can be fractionalized into smaller, more affordable units, meaning that more users can potentially benefit from capital returns on equities.
Cryptocurrency exchange Binance is launching tradable stock tokens that aim to enable a wider section of the public to pocket capital returns on equities, including potential dividends, without having to purchase full, traditional shares.
The first publicly tradable equity in the form of a Binance stock token will be Tesla, the share price of which currently hovers around the $700 mark. Rather than purchase a full, traditional share, for which custody of a physical share certificate is required, users can purchase as little as one one-hundredth of a Tesla share represented by a digital token. Binance stated:
“Each digital token represents one share of equity stock and is fully backed by a depository portfolio of underlying securities that represents the outstanding tokens. Users will be able to trade fractional tokens.”
One one-hundredth of a stock token, therefore, represents the same fraction of a Tesla share, and stock prices will be settled in Binance USD (BUSD), a stablecoin pegged to the United States dollar and issued by Paxos Trust Company. Stock tokens are not redeemable for shares.
Binance CEO Changpeng Zhao believes that digital stock tokens will provide a bridge between traditional and crypto markets and broaden access to equity markets, resulting in a “more inclusive financial future.”
Trading of the digital stock tokens will be commission-free, and the product has been developed together with licensed German investment firm CM-Equity AG and the Switzerland-based asset tokenization platform Digital Assets AG. Participation in their trading is not open to restricted jurisdictions such as China, Turkey and the United States, and a Know Your Customer process must be completed to become eligible as a digital stock token trader on the exchange.
Binance’s Q1 2021 has been a strong one, according to an announcement on Monday, with 260% growth in traded volume and a 346% increase in users. Meanwhile, the exchange’s native token Binance Coin (BNB) has rallied by more than 900% so far this year.
Binance And FTX List Coinbase Stock Tokens Ahead Of Exchange’s Nasdaq Debut
Major exchanges are elbowing for exposure to Coinbase’s listing.
Major global cryptocurrency exchanges including Binance and FTX have announced the listing of Coinbase’s stock token ahead of its direct listing on Nasdaq.
According to an announcement on Wednesday, Binance will list Coinbase’s stock token (COIN) today, allowing its users to trade fractional Coinbase stock on the Binance website.
The new stock token will trade against Binance USD (BUSD), Binance’s stablecoin, which is pegged to the United States dollar and issued by Paxos Trust Company.
Binance said that Coinbase stock tokens are zero-commission digital tokens fully backed by a depository portfolio of underlying securities representing the tokens. The exchange stated that holders of stock tokens qualify for economic returns on the underlying shares, including potential dividends.
Stock token trading on Binance will follow traditional exchange hours and is not available for residents in Mainland China, Turkey and other restricted jurisdictions. The move comes shortly after Binance listed a tradable stock token for Tesla earlier this month.
FTX, a major crypto derivatives trading platform, put out a similar announcement today stating that the platform has already listed the COIN token. “COIN is a pre-IPO contract. It tracks Coinbase’s market cap divided by 261,300,000.
CBSE balances will convert into the equivalent amount of Coinbase Fractional Stock tokens at the end of Coinbase’s first public trading day,” FTX stated on its COIN/USD market page.
“In the event that Coinbase does not publicly list by June 1, 2022, COIN balances will cash-expire to $30.62, in line with an 8 billion dollar valuation,” FTX noted. At the time of writing, the price of COIN token hovers around $580 on FTX.
Coinbase announced that it expects to introduce Class A common stock for trading on the Nasdaq Global Select Market on Wednesday.
In a Wednesday blog post, Coinbase co-founder and CEO Brian Armstrong said that the exchange’s listing is part of the company’s mission to increase economic freedom:
“Today’s listing is a milestone, but it’s not as important as every new day in front of us. […] Everyone deserves access to financial services that can help them build a better life for themselves and their families. We have a lot of hard work to do to make this a reality.”
Former Currency Comptroller, Brian Brooks To Become CEO of Binance US Crypto Exchange
Former top U.S. banking regulator Brian Brooks is joining the U.S. affiliate of the world’s largest cryptocurrency exchange as its new CEO.
Brian Brooks, the former acting comptroller of the currency of the United States Office of the Comptroller of the Currency, is set to become the new CEO of major cryptocurrency exchange Binance US.
According to a Tuesday announcement, Brooks will replace current Binance US CEO Catherine Coley effective May 1, 2021.
Formerly the head of Coinbase’s legal team, Brooks has emerged as a prominent figure in the crypto industry due to his continued efforts to provide regulatory clarity for crypto. Referred to in the community as the “first fintech Comptroller” and “Crypto Comptroller,” Brooks served as acting comptroller of the currency from May 2020 to January 2021.
Binance CEO and founder Changpeng Zhao said that Brooks’ expertise and knowledge will be invaluable as Binance US continues to expand. “Brian is an esteemed leader with an unparalleled blend of experience across traditional financial services, government, and the digital assets industry. Binance US’ ability to attract an executive of Brian’s caliber is a testament to the strength of its platform,” he said.
In an interview with The Wall Street Journal, Brooks said that his priorities at Binance US would include making the exchange a strong competitor of Coinbase as well as reinforcing its commitment to regulatory compliance.
“We are at the cusp of mainstream adoption of blockchain technology and digital tokens by individuals, institutions and governments alike. I am eager to work closely with industry participants and policymakers to develop an enduring regulatory framework that enables Americans to reap the benefits of decentralized finance for generations to come,” Brooks stated.
Binance launched its U.S. affiliate in September 2019. Headquartered in San Francisco, the exchange positioned itself as a separate company from the global Binance exchange, while both are founded by Zhao.
Binance Has Appointed New Head Of ‘Greater China’
It’s not entirely clear when Terence Zeng assumed his leadership role, though the appointment appears to have been recent.
Following the high-profile appointment of Brian Brooks to CEO of Binance.US, it has come to light that the Malta-based parent company has reshuffled its executive leadership by appointing Terence Zeng as head of Greater China.
Zeng reportedly graduated from John Hopkins University and possesses a law degree from the University of Hong Kong, though his online presence is limited. He has been heading Binance’s Greater China division since at least early April, according to an interview with Chain News, a China-based technology publication.
In the interview, dated April 7, Zeng introduces himself as the head of Binance Greater China.
“I am currently the head of Binance Greater China,” he said, according to a translated version of the interview. “Before joining Binance, I was doing finance, mainly engaged in the field of institutional investment and financing, that is, helping clients such as listed companies, fund investment, and financing.”
Zeng also worked for large investment banks in the United States and Hong Kong before shifting focus to “alternative financial products,” which may have led him to cryptocurrencies and Binance. In the interview, he acknowledged that his first exposure to digital assets was as far back as 2013.
Binance is the world’s largest cryptocurrency exchange by volume, but its relationship with China is complicated due to a ban on digital-asset trading in the country. Beijing may be clearing some regulatory hurdles to reenable cryptocurrency trading in the country, though progress appears to be slow.
As Cointelegraph recently reported, People’s Bank of China Deputy Governor Li Bo acknowledged Bitcoin (BTC) and stablecoins as a legitimate alternative investment option. He also didn’t rule out the possibility of stablecoins becoming a “widely used payment tool.”
Binance’s Tesla Stock Token May Have Raised Regulatory Red Flags
Binance may need a license to market security tokens to the Hong Kong public.
Binance’s marketing campaign for its security token representing Tesla stocks to citizens in Hong Kong may be a violation of local securities regulations, according to a prominent local news outlet.
Inducing members of the Hong Kong public to purchase securities is a regulated activity that requires a license from the city’s top financial watchdog the Securities and Futures Commission (SFC), Gaven Cheong, a partner at law firm Simmons & Simmons told the South China Morning Post on Wednesday. Binance does not appear to have secured a license to market or trade security tokens in the region, according to the report.
Binance, one of the largest crypto exchanges by volume, launched its first Binance Stock Token on April 12. This new service allows its users to buy fractions of companies’ shares with digital tokens. The zero-commission tokens qualifies holders for returns including dividends.
The users can purchase as little as one-hundredth of a regular stock. Such transactions can only be settled by Binance USD (BUSD), a U.S. dollar stablecoin issued by the exchange. The underlying stocks are in the custody of a third-party brokerage company, according to Binance’s website. It is unclear which brokerage firm is the custodian and where it is located.
The posting of announcements that advertise a security token could be seen as an invitation amounting to “dealing” in securities, the report said. The SFC considers security tokens “likely to be securities,” according to its statement regarding security tokens in March 2019.
Binance had not responded to requests for comments by press time.
The first stock token issued by Binance is backed by electric car maker Tesla’s stocks. Binance also added tokens representing Coinbase’s $COIN stock after the exchange went public in the U.S. last week.
While banks and trading platforms in Singapore have opened compliant security token trading services due to loosening financial regulations, such tokens are still heavily restricted in many other regions such as mainland China and the U.S.
Binance To Launch Microstrategy, Apple And Microsoft Stock Tokens
The upcoming listings will bring the total number of stock tokens tradable on Binance to five.
Top crypto asset exchange Binance has announced it will list three new stock tokens over the coming week, following the launch of tokens tracking the performance of Tesla and Coinbase shares earlier this month.
On Monday, Binance announced it will launch tokenized stock pairings for leading business intelligence firm MicroStrategy (MSTR) in addition to multinational tech firms Apple (AAPL) and Microsoft (MSFT).
The tokens will allow users to trade fractionalized units of the share tokens, with minimum trade sizing set at one one-hundredth of a token.
Binance’s MSTR tokens are slated to go live at 1:30 pm UTC on Monday, while the AAPL tokens will launch at the same time on Wednesday, and MSFT tokens will be tradable from Friday.
The exchange asserts its stock tokens are “fully backed by a depository portfolio of underlying securities” held by German financial services provider CM-Equity AG. The tokens will observe traditional stock trading hours.
The tokens will only be tradable against the exchange’s stablecoin, Binance USD (BUSD). Binance’s stock tokens are unavailable to residents of mainland China, the United States, Turkey and other jurisdictions restricted by CM-Equity.
Binance launched its first stock token on April 12, allowing its customers to speculate on the price of Tesla (TSLA). The exchange also listed fractional shares for Coinbase (COIN) on April 15.
Binance’s expansion into stock tokens appears to demonstrate increasing competition between it and Hong Kong-headquartered crypto derivatives platform FTX, which launched fractionalized stock trading in October 2020, including derivatives tracking Tesla and Apple shares.
Binance’s Stock Tokens May Violate Law, Germany’s Financial Watchdog Says
BaFin said the stock tokens tracking Tesla, Coinbase and MicroStrategy have been identified as “suspicious” and the exchange could be fined up to $6 million.
Germany’s Financial Supervisory Authority BaFin has warned investors the cryptocurrency exchange Binance may have violated European securities rules with the launch of its stock tokens.
* In an announcement Wednesday, BaFin said the Binance stock tokens tracking the movement of shares in Tesla, Coinbase and MicroStrategy have been identified as “suspicious” and require a prospectus that wasn’t issued prior to trading.
* BaFin said the cryptocurrency exchange has violated the prospectus obligation under Article 3 Paragraph 1 of the European Prospectus Regulation.
* According to BaFin, the violation of the prospectus constitutes an administrative offense and can be punished with a fine of up to €5 million ($6 million) or 3% of Binance’s annual revenue.
* Elsewhere red flags have already been raised by Hong Kong law firms regarding the Binance stock tokens launched earlier this month.
* On April 22, the Financial Times reported that U.K.’s regulator, the Financial Conduct Authority, is “working with the firm [Binance] to understand the product, the regulations that may apply to it and how it is marketed.”
* The stock tokens allow Binance customers to purchase as little as one-hundredth of a regular share using Binance USD (BUSD), a U.S. dollar stablecoin issued by the exchange.
* Binance was contacted for comment, but didn’t immediately respond at the time of publication.
Biggest Crypto Exchange Binance Briefly Stopped Withdrawals
Binance Holdings Ltd., the largest cryptocurrency exchange, briefly suspended withdrawals on Monday.
The company made the announcement on Twitter that it had stopped withdrawals, and then about half an hour later said they had resumed. Changpeng Zhao, the Binance co-founder who goes by CZ, said by text message that “we sometimes have to do some system maintenance work,” without elaborating further.
Withdrawals are now resumed. Thank you for your patience. https://t.co/DYHhEc32uu
— Binance (@binance) May 10, 2021
Trading disruptions are relatively common in the world of crypto, where exchanges operate in a lightly regulated environment and aren’t subject to the same stringent controls of traditional exchanges. Still, the frequency of the problems has raised questions about the safety of crypto trading at a time when thousands of new customers are flocking to platforms like Coinbase, Binance and Kraken.
The popularity of crypto and its wild market swings are also catching the attention of more central bankers and regulators. Last week, Bank of England Governor Andrew Bailey issued a stark warning to those investing in cryptocurrencies: “Buy them only if you’re prepared to lose all your money.”‘
Binance, which is run from Asia, has been attracting more than 300,000 user registrations a day, exceeding its previous peak reached in 2017, Zhao told Bloomberg TV in February.
‘So Many Locked Out’: Binance Users Say Their Accounts Have Been Frozen For Months
Binance Global exchange halted withdrawals Monday in a “temporary suspension” that affects all its users, as did other exchanges such as Coinbase. It’s not uncommon for exchanges to have downtime or freeze withdrawals at times of hot market activity. But since at least late 2020 Binance users from the U.S. and around the globe have had their accounts frozen for unconventional reasons.
The names of all clients cited in this article have been replaced by pseudonyms to protect their privacy.
Take Gregory Hitchens, for example. When he opened his Binance US account last year, he thought he was doing the responsible thing by moving his funds off Binance’s original exchange to deposit them onto the Uncle Sam-approved counterpart, as he was prompted when Binance began sweeping U.S. users off its main exchange in 2020.
But then Binance.US froze his account for what he called “little to no reason.”
“I traded in some harmony tokens for [U.S. dollars] and couldn’t withdraw them,” Hitchens told CoinDesk. “Then Binance informed me that the hold was because of a $20 chargeback on my account for a transfer I never made.”
Hitchens paid the chargeback to reconcile his balance on Feb. 8, but he received emails from Binance complaining about the chargeback still a week later, according to screenshots shared with CoinDesk.
Out of desperation he sought information online and wound up texting the mother of Binance.US CEO Catherine Coley so he could get his funds unstuck. Now, Binance is closing his account. (And, by the way, Catherine Coley is stepping down, to be replaced by former Acting Comptroller of the Currency Brian Brooks).
Hitchens was able to retrieve his cash, but a dozen or so Binance.US users who spoke with CoinDesk still have their coins stuck in limbo. And the problem is larger than the U.S. Clients from Binance’s primary exchange and Binance Australia have also been affected, per documents shared with CoinDesk.
Many of the affected Binance users flagged for “risk management” and anti-money laundering (AML) hold accounts that are fully verified; given that know-your-customer (KYC) verification process is a risk management process to prevent money laundering, Binance’s stated purpose for freezing these accounts leaves unanswered questions.
‘So Many People Locked Out’
Binance declined an interview with CoinDesk to discuss these issues, but the CEO issued a statement that chalked the problem up to “compliance issues” and anti-money laundering risk factors.
Binance declined a phone interview with CoinDesk to discuss the locked accounts and the painstaking verification process Summers and others went through. CEO Changpeng Zhao issued the following comment:
We have very strict risk controls in place, firstly to secure user funds and secondly to adhere to local regulatory requirements.
Our top priority is user security. Accounts flagged for suspicious activity, whether it is an attempted hack or failing audits required by our AML standards, are suspended during pending investigations. Each and every one of these cases require individual attention and may require additional information from users for verification.
Accordingly, some users may be required to furnish evidence showing that their account registrations are compliant. These processes have always been in place to adhere to local, regional and global compliance requirements.
Still, as some users attempt to verify themselves, they’re having trouble recouping control of their accounts – or getting hold of a living, breathing Binance representative to resolve the issues.
Logan Brown, for example, had several thousand dollars worth of BNB coins locked in his Binance.US account for months.
Brown neglected to fill out the memo field for these coins when he deposited them on the exchange, which apparently caused Binance to not credit his account with the sum. He said this “must be very common” because he was directed to a webpage with recovery instructions for that specific issue. After following these steps, he received an email saying his account would be credited in five days.
Brown submitted the requested documents in January. It wasn’t until mid-April he recovered the funds.
He said that during his repeated requests to have his funds unlocked, he received “vague” emails that said his “memo case is not on hold.”
“I believe many others are in the same boat,” he said.
A quick glance at the replies in this tweet from Binance.US Customer Support shows how many others are piling into the boat.
The tweet was first posted a year ago. Since then it has amassed a pile of tickets complaining of locked accounts, frozen trading and uncredited deposits. Many complain of Binance taking these actions without warning or proper justification.
‘Impossible’ Verification Hoops
Buffy Summers had her account of nearly four years suddenly flagged for risk management after she initiated a withdrawal of ADA (the native token of the Cardano blockchain) on Feb. 28, a few days after she completed “advanced verification” on Binance Global. Support asked her to provide proof of deposit for her coins, even though she purchased the coins in 2018 on Binance using Canadian dollars through one of Binance’s partners, Simplex.
She said she was asked to provide more than 15 videos as evidence of her funds’ provenance, some of which were impossible to upload because the video files ended up being larger than Binance could accept. Summers clarified that she is not using a VPN when accessing Binance, something that has raised flags for the exchange’s compliance software in the past, according to her conversations with Binance support.
Summers is compiling a document of complaints from other customers who are experiencing similar difficulties.
“Customer Support is also asking me to do impossible things which the Binance website doesn’t support, such as uploading pdf files in the chat function, when the chat does not support such files,” said one such user. “I was also asked to make a bank transfer appeal by customer support, I did this and I got an email response saying the appeal was rejected due to ‘risk control.’”
“It has been two months since I first asked Binance about this issue. I have gotten basically no help in solving the issue, these funds are mine to withdraw by legal right and if this problem persists I will be forced to take legal action, which would be a waste of time and money for everyone involved,” the complaint reads. Its author added that while they can’t take any funds out of the exchange, they can still put funds into it and make trades.
In this document, one customer of Binance.US complains of $200,000 locked. “I have had a Binance.US account for over a year. I am still getting the same ‘withdrawals suspended due to risk management.’ I have had my past tickets closed for trying to get help on what additional info they need from me to mitigate risk and no response,” the user said.
Another former Binance.US client claims that a $59,000 BNB deposit, which had been verified it was sent to the correct address, was never credited to their account.
One Binance Global user says they’ve had ETH locked since December of last year.
Another Binance Australia user had their account locked for “being at risk” even though “prior to this I was fully verified – license, bank, proof of address.”
“Now I tried to talk to Binance support and they asked to prove it was me and requested I submit a video of me recording my face, Binance deposits and my bank statements. I did this and got rejected,” the user said.
Yet another user experienced a similar frustration: “Same ‘risk management’ shutdown on my account withdrawals. No response in 2 weeks to video upload with U.K. passport etc.”
My Kingdom For A Help Desk
In response to complaints in the replies of its Customer Service Twitter thread, Binance routinely blames Amazon Web Services for the account disruptions. Some users CoinDesk spoke with had their tickets resolved after months, but others still have unresolved issues.
That’s because getting hold of actual Binance representatives is more difficult than not.
“I’ve been looking for any contact info for any humans at Binance … it’s not public,” one user, James Mallory, told CoinDesk.
In fact, Mallory had to use ZenDesk, a third-party help desk, to try to resolve his problem when emailing failed. Binance uses ZenDesk to manage its customer support, but Mallory couldn’t even get in touch with a Binance rep on this platform, instead speaking with a ZenDesk employee.
Summers could only retrieve her funds after directly messaging the CEO of Binance Australia, Jeff Yew. Much like Hitchens’ contact with Coley via her mother, this outreach resolved the issue instantly. Also like Coley: Yew is no longer with the company, having departed in April.
Per the document Summers compiled, plenty of users are still waiting for their funds to be unlocked. One has been waiting for nearly a year, Summers told CoinDesk.
Regulatory Whack-A-Mole Meets Shotgun KYC
The “shotgun” KYC that U.S. Binance users have experienced isn’t exclusive to Binance, though admittedly other U.S.-restricted exchanges (like BitMEX) often give users the ability to withdraw to an external wallet before closing the account instead of demanding an internal transfer as Binance does.
Moreover, as evidenced by the troubles experienced by Summers and others, these risk and compliance account freezes are happening to more than just Binance.US users. Most if not all the cases CoinDesk reviewed were flagged for risk control, even for those where the coin purchases were made on Binance itself and for users who were fully verified.
After the 2017 market mania died down, it was not uncommon for Binance.US users to forget about their coins on Binance Global, only to recall their holdings (now worth substantially more than four years ago) when bitcoin hit fresh highs at the end of last year.
Binance made it explicit last year that it would strictly enforce regulations to keep U.S. users off the international exchange and encourage them to instead sign up for Binance.US to avoid repercussions. In order to retrieve the coins on their regular Binance accounts, users were required to open a Binance.US account.
But some users, depending on how much KYC information they submitted when signing up during the last bull market, still went unnoticed for some time and were only recently hit with after-the-fact, “shotgun” KYC. As with users who made the switch last year, these users were required to open a Binance.US account to transfer their funds; they were not allowed to simply withdraw them to an external wallet.
“When that bubble popped I kinda bought and forgot about the coins, but checked in every so often to see how [the account] was doing,” one user, Dave Sweet, told CoinDesk. “Recently I tried logging back in and received a message that said that binance.com was now separate from binance.us and that I had, like, 20 days to create a Binance.us account or that my account would be deleted. The site said that I could only move the coins into a .us account, I couldn’t trade, sell or extract them. I tried to make a U.S. account, but for some reason Binance.us isn’t authorized for use in Texas, so I was unable to get my coins at all on my own.”
To get his coins, it took Sweet soliciting the help of another friend with a Binance Global account (which, although also opened in 2017, was not full-KYC’d but still hadn’t been flagged by Binance). Sweet transferred the funds to this friend’s account, who then sent them to a wallet Sweet controls. This friend’s account has since been flagged and is no longer usable.
CoinDesk asked the exchange for clarity regarding already verified accounts that had completed advanced verification and used Binance-approved channels to make their purchases (like Summers). Binance refused to make any comment beyond its statement. It also declined to comment on the painstaking verification processes that for many users, so far, have resulted in weeks or months of radio silence.
Binance Faces Probe by U.S. Money-Laundering And Tax Sleuths
Binance Holdings Ltd. is under investigation by the Justice Department and Internal Revenue Service, ensnaring the world’s biggest cryptocurrency exchange in U.S. efforts to root out illicit activity that’s thrived in the red-hot but mostly unregulated market.
As part of the inquiry, officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business, according to people with knowledge of the matter who asked not to be named because the probe is confidential. Led by Changpeng Zhao, a charismatic tech executive who relishes promoting tokens on Twitter and in media interviews, Binance has leap-frogged rivals since he co-founded it in 2017.
The firm, like the industry it operates in, has succeeded largely outside the scope of government oversight. Binance is incorporated in the Cayman Islands and has an office in Singapore but says it lacks a single corporate headquarters.
Chainalysis Inc., a blockchain forensics firm whose clients include U.S. federal agencies, concluded last year that among transactions that it examined, more funds tied to criminal activity flowed through Binance than any other crypto exchange.
“We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion,” Binance spokeswoman Jessica Jung said in an emailed statement, while adding that the company doesn’t comment on specific matters or inquiries. “We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.”
Spokespeople for the Justice Department and IRS declined to comment.
U.S. officials have expressed concerns that cryptocurrencies are being used to conceal illegal transactions, including theft and drug deals, and that Americans who’ve made windfalls betting on the market’s meteoric rise are evading taxes. Such worries have been a hindrance to the industry going mainstream, even as Wall Street increasingly embraces Bitcoin and other tokens amid a global investing frenzy.
This month’s cyber-attack against Colonial Pipeline Co. that’s triggered fuel shortages across the Eastern U.S. is the latest sign of what’s at stake. Colonial paid Eastern European hackers a nearly $5 million ransom in untraceable cryptocurrency within hours of the breach, Bloomberg News reported Thursday, citing two people familiar with the matter.
While the Justice Department and IRS probe potential criminal violations, the specifics of what the agencies are examining couldn’t be determined, and not all inquiries lead to allegations of wrongdoing.
The officials involved include prosecutors within the Justice Department’s bank integrity unit, which probes complex cases targeting financial firms, and investigators from the U.S. Attorney’s Office in Seattle.
The scrutiny by IRS agents goes back months, with their questions signaling that they’re reviewing both the conduct of Binance’s customers and its employees, another person said.
The U.S. Commodity Futures Trading Commission has also been investigating Binance over whether it permitted Americans to make illegal trades, Bloomberg reported in March. In that case, authorities have been examining whether Binance let investors buy derivatives that are linked to digital tokens. U.S. residents are barred from purchasing such products unless the firms offering them are registered with the CFTC.
Zhao has said Binance closely follows U.S. rules, blocks Americans from its website, and uses advanced technology to analyze transactions for signs of money laundering and other illicit activity. Last year, the firm warned that U.S. residents would have their accounts frozen if they were found to be trading, crypto trade publications have reported.
The inquiries follow a Chainalysis report on criminal transactions involving digital tokens.
The firm tracked Bitcoin worth $2.8 billion that it suspects crooks moved on to trading platforms in 2019. Chainalysis determined that roughly 27%, or $756 million, wound up on Binance. Binance responded by saying it adheres to all anti-money laundering regulations in the jurisdictions in which it operates and works with partners like Chainalysis to improve its systems.
In the U.S., authorities have been cracking down on exchanges for flouting laws that are meant to prevent financial crimes, with officials citing the platforms use by terrorists and hackers. Tax violations have also been a priority, with the government recently winning a court order as it seeks to unmask U.S. clients of Kraken, a San Francisco-based exchange.
In October, federal prosecutors in Manhattan announced charges against the founders of Seychelles-based BitMEX, accusing them of violating the Bank Secrecy Act by permitting thousands of U.S. customers to trade while publicly claiming to restrict their access.
The claims included failing to register as a futures merchant with the CFTC and not having adequate anti-money laundering controls. Three of the BitMex officials pleaded not guilty and a trial has been scheduled for March 2022. One remains at large.
With the U.S. circling, Binance has stepped up its presence in Washington and retained a former Treasury Department official and top white-collar defense lawyers to represent it in legal cases and matters being reviewed by regulators. In March, the firm tapped former U.S. Senator Max Baucus, a Montana Democrat, to advise it on policy and government relations.
In September 2019, Binance partnered with a firm called BAM Trading Services Inc., which launched Binance.US to cater to American clients. Brian Brooks, who was a top banking regulator when he led the Office of the Comptroller of the Currency during the Trump administration, became chief executive officer of Binance.US this month.
Amid the hiring blitz, the company has popped up in U.S. cases tied to criminal activity. In February, two Florida men were charged with running an online fentanyl trafficking operation, with one of them accused of depositing the proceeds in a Binance account.
That same month, the Justice Department sought the forfeiture of cryptocurrency worth $450,000 traced from ransomware attacks that hit several U.S. companies to a Binance account held by a 20-year-old Ukrainian national. The government didn’t accuse Binance of wrongdoing in either enforcement action.
Along with the CFTC, the Justice Department is likely to examine steps that Binance has taken to keep U.S. residents off its exchange. One person familiar with Binance’s operations said that prior to the establishment of Binance.US, Americans were advised to use a virtual proxy network, or VPN, to disguise their locations when seeking to access the exchange.
Jung, the Binance spokeswoman, said the exchange has never encouraged U.S. residents to use VPNs to get around its rules, as doing so would be something “that has always been contrary to our company’s principles.” In January, Zhao tweeted that Binance’s security systems block Americans even if they try to connect through one of the networks.
“We have implemented strong access controls that have been tested via external audit and are under continuous review and evaluation by Binance to ensure that the appropriate restrictions are in place and are effective,” Jung said.
Binance To Cease Operations In Ontario Following Regulatory Crackdown
Ontario’s crypto exchange crackdown continues as Binance plans to end operations Dec. 31, 20201.
On the tails of a warning from Japanese regulators on Friday, Binance has announced in a short statement yesterday that it will cease providing services to users located in Ontario.
Binance did not return a request for comment by publication time.
In recent weeks Ontario has emerged as one of the most aggressive cryptocurrency regulators. On April 19th, the regulator introduced new prospectus and registration requirements for cryptocurrency exchanges. Last week The Ontario Securities Commission announced it would be holding hearings regarding cryptocurrency exchange Bybit “flouting” Canadian law. Additionally, the regulator took steps against two companies associated with Kucoin earlier in the month:
“KuCoin is operating an unregistered crypto asset trading platform, encouraging Ontarians to use the platform, and allowing Ontario residents to trade crypto asset products that are securities and derivatives,” the OSC wrote.
Ontario regulators arn’t the only ones who have taken a closer look at Binance’s activities within their jurisdiction, however. On Friday, the Financial Services Agency (FSA) of Japan warned that Binance may be operating in the country without a license. The warning comes on the back of the governor of the Bank of Japan slamming Bitcoin as a “speculative asset” earlier in the year.
Japanese and Canadian Binance users worried about service ending in their countries might rest easier knowing that trading for some American users persisted for months on the main Binance site even after requests for users to migrate to Binance US. Additionally, Binance CEO Changpeng Zhao has admitted that Americans find “intelligent” ways to circumvent the geofence.
Binance Crypto Exchange Ordered To Cease U.K. Activities
The world’s largest cryptocurrency exchange faced regulatory ire in the U.K. as well as Japan.
Authorities in the U.K. and Japan took aim at affiliates of Binance Holdings Ltd., the world’s largest cryptocurrency exchange network, in the latest regulatory crackdown on the wildly popular trade in bitcoin and other digital assets.
The U.K. Financial Conduct Authority, the country’s lead financial regulator, told consumers Saturday that Binance’s local unit wasn’t permitted to conduct operations related to regulated financial activities.
Binance offers trading of cryptocurrencies and derivatives linked to them such as futures. Binance Markets Ltd., the company’s U.K. arm, applied to be registered with the Financial Conduct Authority and withdrew its application on May 17.
“A significantly high number of cryptoasset businesses are not meeting the required standards” under money-laundering regulations, said a spokesperson for the FCA in an email. “Of the firms we’ve assessed to date, over 90% have withdrawn applications following our intervention.”
Japan’s financial watchdog issued a statement on June 25, saying that Binance isn’t registered to do business in the country.
A Binance spokesperson declined to comment.
The price of bitcoin whipsawed over the weekend after the regulatory moves, falling as much as 6% from its level at 5 p.m. ET on Friday before recovering all the lost ground and trading around $33,250 on Sunday, according to data from CoinDesk. In mid-April, it was above $63,000.
As of April, Binance operated the largest cryptocurrency exchange in the world by trading volume, allowing tens of billions of dollars of trades to pass through its networks, according to data provider CryptoCompare. It was founded in 2017 and initially based in China, later moving offices to Japan and Malta. It recently said it is a decentralized organization with no headquarters.
The U.K.’s FCA has taken a wary stance on cryptocurrencies, earlier this year instituting a ban on individual investors trading cryptocurrency derivatives. In its statement Saturday about Binance, it warned consumers to be careful of online advertisements promising high returns on crypto investments.
The FCA move doesn’t ban customers from using Binance completely; U.K. customers can continue to use Binance’s non-U.K. operations for activities the FCA doesn’t directly regulate, such as buying and selling direct holdings in bitcoin.
Cryptocurrencies have come under fire for their use in illegal activities such as money laundering, ransoms and fraud. The digital currencies are often unregulated, but derivatives linked to them are generally overseen by national regulators including the U.K.’s FCA.
China also has recently intensified its crackdown on cryptocurrencies. Its central bank said last week that the country’s largest banks and payment processors should take an active role in curbing cryptocurrency trading and related activities.
Binance Faces Regulatory Upheaval As Lawmakers Target ‘Global’ Exchanges
Regulators in Japan, the United Kingdom and the Canadian province of Ontario have all tightened their grip on cryptocurrency exchanges. Binance has been caught in the crosshairs.
The world’s largest cryptocurrency trading platform, Binance, has faced regulatory upheaval over the past week as jurisdictions clamped down on the use of unauthorized exchanges and warned citizens against accessing them. For Binance, adopting the moniker of “global exchange” has done very little to appease regulators that require specific licenses to offer financial services to their citizens.
Below is a brief recap of recent regulatory actions surrounding Binance.
On June 25, Japan’s Financial Services Agency, or FSA, accused Binance of operating in the country without proper registration – potentially setting the stage for a protracted legal battle with regulators.
That’s because, unlike other jurisdictions, Japan has carved out specific registration and operating rules for cryptocurrency exchanges since at least 2018. Rather than comply with the directives, Binance decided to move its operations to Malta in 2018.
The FSA’s warning isn’t limited to Binance, either. In May of this year, the regulator warned derivatives exchange Bybit that it was in violation of registration rules.
Around the same time that Japan’s FSA issued its warning, Binance announced it would cease all operations in the Canadian province of Ontario after the provincial securities regulator introduced sweeping new measures targeting cryptocurrency exchanges.
On Apr. 19, the Ontario Securities Commission, or OSC, introduced new prospectus and registration requirements for crypto exchanges. Using that as a benchmark, the OSC singled out two crypto exchanges – Bybit and Kucoin – for allegedly “flouting” Canadian securities laws.
Rather than comply with the new edicts, Binance decided to exit the market entirely, giving users until the end of the year to liquidate and close their accounts.
Binance was in the headlines again on Sunday after the United Kingdom’s Financial Conduct Authority, or FCA, ordered the exchange to halt all “regulated activity” in the country. This was interpreted by many as a blanket ban on using Binance to buy and sell cryptocurrencies in the U.K. In the meantime, transactions in the local pound Sterling currency have reportedly been blocked, according to users.
Binance asserts that the FCA notice pertains to Binance Markets Limited, which is a separate legal entity acquired by the firm in May 2020. As such, it “does not offer any products or services via the Binance.com website,” the company said.
Nevertheless, from June 30 onward Binance must notify U.K. users of the FCA’s restrictions on its website and mobile apps.
In April of this year, Germany’s Financial Supervisory Authority, or BaFin, warned Binance that it could be fined up to $6 million, or 5 million euros, for offering security-tracking tokens without an investor prospectus.
Specifically, BaFin raised issues with digital tokens that track blue-chip stocks like Microsoft, Apple and Tesla. According to the Financial Times, Binance told the regulator that its digital stock tokens are not securities because they are purchased through a third-party broker and cannot be transferred to other exchanges.
Binance operates in the United States through a dedicated trading desk called Binance.US, but it too has faced scrutiny in recent months. In May of this year, it was reported by Bloomberg that Binance is under investigation by the Justice Department and Internal Revenue Service in a joint money-laundering and tax evasion probe.
Changpeng Zhao, Binance’s CEO, refuted the title of the report by drawing attention to the fact that Binance cooperated with U.S. law enforcement agencies to “fight bad players.”
Thailand SEC Files Criminal Complaint Against Binance
The SEC alleges the crypto exchange is operating a digital-asset business in the country without a license.
Binance’s woes continue as Thailand’s Securities and Exchange Commission (SEC) filed a criminal complaint against the crypto exchange for allegedly operating in the country without a license.
* The securities regulator filed the complaint with the Economic Crime Suppression Division of the Royal Thai Police (ECD), saying Binance had failed to meet a deadline for responding to an earlier warning , according to an announcement on the SEC’s website Friday.
* The SEC claims the exchange solicited the Thai public to use its services via its website or the “Binance Thai Community” page on Facebook.
* That means Binance is operating an unlicensed digital-asset business, the regulator said.
* “Only providers who have obtained relevant licenses under the law are allowed to provide services related to digital asset trading, exchange, depository, transfer, withdrawal or any transactions related to digital assets,” the SEC said.
* The regulator said it issued a warning letter on April 5 this year requiring Binance to submit a written response. It failed to do so within the specified time, the SEC said.
* The complaint comes at a turbulent period for the crypto exchange. It has received a warning over a similar matter from the regulator in Japan, been barred from conducting regulated activity in the U.K. and pulled out of operating in Ontario following regulatory action against fellow exchanges in the Canadian province.
* Binance did not immediately respond to CoinDesk’s emailed request for comment.
Binance Not Authorized To Operate In The Cayman Islands, Regulator Says
The Cayman Islands’ financial watchdog said that Binance has not registered to operate in the nation and that it was investigating the matter.
The Cayman Islands’ financial regulator has joined a list of watchdogs globally that are scrutinizing Binance and its business dealings.
“Binance Group and Binance Holdings Limited are not registered, licensed, regulated or otherwise authorized by the Authority to operate a cryptocurrency exchange from or within the Cayman Islands,” the islands’ Monetary Authority said in a press release Friday.
It’s the latest in a string of developments from regulators against the crypto business following reports Singapore’s financial regulator would “follow up” on developments from other watchdogs including in the U.K. and Japan.
The authority said Binance Holdings Ltd. and Binance Group were not subject to any regulatory oversight by itself and it is investigating whether any of Binance’s businesses fall within its jurisdiction.
Any company incorporated or entity registered under the Cayman Islands Companies Act of 2020 that provides virtual asset services must obtain a license in accordance with the Virtual Asset Service Providers Act (VASPA), the regulator said.
Binance Booms As Crypto Trading Unfolds Beyond Nations’ Reach
It pays its people in a digital token of its own devising. It’s based wherever its founder happens to be. A growing list of countries want no part of it. And Binance Holdings Ltd. might just be the biggest, craziest thing in the big, crazy realm of cryptocurrencies.
Welcome to the world of Changpeng Zhao, the elusive, flip-flop-wearing software developer everyone calls CZ — and the brains behind Binance. For now, it’s the largest cryptocurrency exchange on the planet, even though the U.K. just booted an affiliate and Thailand filed a criminal complaint against the firm for operating without a license.
Founded in China, banished to Japan and later self-exiled to Malta, Binance today is officially domiciled in the Cayman Islands and, unofficially, headquartered precisely nowhere.
The platform lives on the internet and so far has seemed to elude regulators’ attempts to pinpoint exactly how it operates and where. At its heart is CZ, a crypto cult figure with about 3 million Twitter followers and a stated desire to minimize government oversight. Lately, he’s been living in Singapore.
Only now, authorities in several countries want to know more about CZ’s four-year-old experiment in crypto-commerce. The U.K. rebuke is one of the biggest blows so far: Binance Markets Ltd. can’t offer products or even advertise — a move that prompted Barclays Plc to block debit-card payments to the exchange.
The U.S. Justice Department and the Internal Revenue Service were already investigating whether Binance is a conduit for money laundering and tax evasion. The Commodity Futures Trading Commission is probing whether Binance let Americans place wagers that violated U.S. regulations.
Germany’s financial regulator said it’s concerned the firm broke rules by selling tokenized shares of Tesla Inc. and other companies.
Binance told Bloomberg it’s committed to following the rules and strives to be a partner to watchdogs in routing out misconduct, a message the firm has delivered consistently.
The scrutiny shows that in the Wild West of crypto — make that the Wild East, North and South, too — getting a handle on Binance presents myriad challenges. Last year, a federal judge dismissed a lawsuit filed by a Binance contractor in Portland, Oregon, because the young company has neither offices nor managers in the states. The court ruled that it lacked jurisdiction.
The case was one for our meme-filled, cryptodenominated times. CZ acolytes refer to themselves as Binancians, and like all good Binancians, Steve Reynolds had been paid not in dollars, euro or yen but in BNB, the company’s crypto token.
After Reynolds fell out with Binance, he alleged CZ threatened to hurt him financially. Then, when Reynolds checked his Binance account — empty. Some $300,000 worth of BNB had been spirited out, he claimed.
“CZ personally stole money from me,” Reynolds said in an interview, reiterating allegations he made in his lawsuit. “There are people who have worked for Binance who believed and got screwed.”
Binance denied it did anything wrong. Its lawyer, Roberto Gonzalez, a former Obama administration official, suggested during a hearing that the company had good reason to seize Reynolds’s funds, without offering specific details. Binance has used jurisdiction arguments in other litigation — thus far, keeping adversaries from probing internal company records for any signs of ties within the U.S.
CZ conceded in a July 6 blog post that Binance hasn’t “always got everything right, but we are learning and improving every day.” He added that cryptocurrencies need more regulation, so that more people feel safe participating in the market. He declined to be interviewed for this story.
With Bitcoin’s meteoric rise, Binance has attracted legions of day traders eager to spend hours on computer screens swapping tokens.
It’s also arguably the dream of Libertarian-leaning crypto enthusiasts and the nightmare of the Federal Reserve and other central banks: A thriving financial ecosystem where governments can’t control the printing of money or easily monitor transactions, including for possible crimes.
Binance operates everything from digital wallets to its own blockchain that lets people build crypto trading apps to a popular cryptocurrency tracking website, which listed the BNB token as the fourth-biggest digital coin in the world last week after it surged a whopping 1,700% over the past year.
Those who’ve crossed paths with CZ say he inspires something close to a religious-like following among adherents. They also say he’s determined to avoid government red tape that could slow Binance’s momentum, according to interviews with more than a dozen people who are familiar with the firm’s operations. Most asked not to be named so they could speak candidly.
When the company faces criticism, CZ often takes to social media, labeling news articles FUD — an acronym for fear, uncertainty and doubt that’s the equivalent of tagging something fake news. During one March chat with fans on the Clubhouse social media platform, he said competitors have at times bribed journalists to write “bad things about Binance.”
“We take our legal obligations very seriously,” Binance said in its emailed statement to Bloomberg. “Our company is less than four years old and is evolving. We are proud of the compliance steps we’ve taken in this short period and look forward to building more robust structures in the months and years to come.”
For a self-professed crypto billionaire, CZ doesn’t show it. The 44-year-old typically wears t-shirts and shorts but upgrades to Binance-branded apparel when appearing at crypto events or doing television interviews. He grew up in China’s Jiangsu province, with his family moving to Vancouver when he was a teen.
After studying computer science at Montreal’s McGill University, one of his first jobs was working for a trading platform at Bloomberg LP, the parent of Bloomberg News.
By 2014, CZ was the chief technical officer of OKCoin, then China’s biggest Bitcoin exchange. He helped launch an overseas trading platform with features that would later become hallmarks of Binance: It was easy to use and offered customers lots of tokens to buy and sell. The platform also undercut rivals through lower transaction fees and freebies for Chinese residents.
In June 2017, CZ founded Binance, surrounding himself with an inner circle of Ivy League-educated lawyers and bankers who were eager for the chance to make fortunes by getting in on the ground floor of a startup. The firm’s rise was fast, fueled by Binance letting clients open an account with nothing more than an email address. No identification was required.
Within a year, Binance’s trading volume had surpassed all competitors and CZ regularly told employees that it might become the first trillion-dollar company, according to a person who heard the remark. Still, Binance wasn’t public and CZ controlled the equity.
The company had other unusual characteristics. Binance workers lacked employee benefits, classified as contractors of an entity registered in the Cayman Islands, people familiar with the matter said.
Staff were also advised to keep any affiliations to Binance off professional websites like LinkedIn. Expenses were at times reimbursed from CZ’s personal bank account, according to two people familiar with the matter. When the BNB token was less liquid, some workers recall its price spiked just before paydays, resulting in fewer Binance-created coins to meet payroll.
By 2018, Binance had a developing U.S. problem. It wasn’t registered with the Securities and Exchange Commission, CFTC or Treasury Department yet nearly 40% of its business was in America. That’s fine if exchanges are just letting U.S. customers trade Bitcoin, which mostly falls outside regulators’ oversight. But Binance offers derivatives tied to tokens, according to its website, a no-no unless firms have proper authorizations.
Evidence separately emerged that criminals were flocking to Binance. After examining a number of transactions, Chainalysis Inc. concluded that more funds tied to illicit activity flowed through Binance than any other crypto exchange, according to a report that the blockchain forensics firm released in January 2020.
Chainalysis, in a more recent report, said people can readily purchase accounts for Binance and other exchanges on the dark web.
Binance said in a Bloomberg story published in May that it adheres to anti-money laundering requirements in the jurisdictions in which it operates and works with firms like Chainalysis to improve its compliance systems.
References to hackers allegedly using Binance to move funds from ransomware attacks and other crimes have also popped up in U.S. court dockets filed by federal prosecutors. And Binance workers realized at one point that the company’s exchange was being used by Iranians, a possible violation of U.S. sanctions, two people familiar with the matter said. CoinDesk reported in November 2018 that Binance sent an email alert to customers who appeared to be based in Iran, demanding that they withdraw their assets.
“Regulators around the world are positioning their departments to scrutinize carefully exchanges, especially those with the reach, popularity and trading volume of an exchange like Binance,” said Tonya Evans, a professor at Penn State Dickinson Law School who teaches a course on cryptocurrencies. “Exchanges that turn a blind-eye to the regulatory concerns regarding money laundering, unregistered securities and payments for illegal activities, do so at their peril.”
Binance says abiding by the rules is a top priority, a point underscored by its hiring of more than 200 compliance professionals in the past year. Last month, CZ took to Twitter to note that Binance was praised by Russian and Ukrainian law enforcement agencies for the company’s help in tracking down cybercriminals.
Binance later issued a press release detailing how it worked with several nations, including U.S. authorities, to investigate a criminal organization known as FANCYCAT that it said is linked to more than $500 million in ransomware damages.
CZ has also tried to emphasize Binance’s efforts to keep Americans off its main exchange. During the March Clubhouse session, he said Binance does an extensive analysis of blockchain transactions to prevent unlawful activity.
“I believe we have the most advanced U.S. person-detection algorithms in the industry, not just the crypto industry,” CZ said, adding that the technology is so good that it sometimes inadvertently blocks customers who’ve merely visited the states.
Those restrictions didn’t stop Keif Atwood, a Little Rock, Arkansas-based investor whose handle is CryptoKeif. On June 15, Atwood traded on Binance for hours straight, live-streaming himself as more than 1,000 people watched on Twitch and cheered him on — at one point he fell asleep in his chair as the camera kept rolling. Atwood was buying and selling Bitcoin futures, products that should have been off-limits.
In an interview, Atwood said he learned how to access Binance by watching online videos in which traders explained how they used virtual private networks, or VPNs, to disguise their locations. Atwood added that he’s lost as much as $80,000, but was hoping to make some of it back through KeifCoin, a token he used Binance to create.
“I am concerned about it, but I never had anyone to talk to about it,” Atwood said when asked if he’s worried that his trading may have violated rules.
Navigating the U.S. is something Binance has long grappled with. Harry Zhou, a former Wall Street lawyer, delivered a PowerPoint presentation to CZ and other executives in 2018 that detailed how they could create a U.S. entity but still let Americans access Binance’s unregulated services through shell companies and other means, said two people familiar with the matter.
Binance, in court filings, said it never implemented the proposal. In 2019, Zhou helped incorporate Binance.US, a separate firm that caters to American clients, according to company filings.
A phone number for Zhou is no longer active and spokespeople for Binance and Binance.US declined to provide contact information for him.
In a sign that authorities are getting more aggressive, the U.S. Justice Department filed criminal charges last year against four executives at BitMEX, a rival cryptocurrency exchange.
The allegations included failing to implement controls to prevent money laundering and terrorism financing, and allowing U.S. residents to unlawfully trade Bitcoin futures. Three of the men charged have pleaded not guilty while a fourth remains at large.
Crypto Exchanges Have A Plan To Beat Binance: Play By The Rules
Coinbase, Kraken, and Gemini are embracing regulation. “We’re playing the long game,” says Cameron Winklevoss.
In the wild world of cryptocurrency exchanges, one strategy never seemed to pay off: embracing regulation.
Take Gemini, started by twins Cameron and Tyler Winklevoss. While it was plastering posters in New York subways a few years ago, declaring there was “Finally, a regulated place to buy, sell and store crypto,” an exchange called Binance—with no clear headquarters and a mysterious structure—quietly took the top spot among the world’s cryptocurrency exchanges.
Suddenly, touting adherence to the rulebook looks very smart. Although Binance Holdings Ltd. turns away American customers, it is now said to be facing probes from U.S. agencies. In late June, the financial watchdog in the U.K. told a Binance affiliate that it wasn’t authorized to carry out regulated activities in that country.
The pressure on Binance raises the odds that several exchanges pledging to comply with tough U.S. regulations may soon find themselves operating with less competition in some of the world’s biggest economies. “We’re playing the long game,” says Cameron Winklevoss. “We’re trying to be the fastest tortoise in the race. The long game pays off over time.”
Warnings and lawsuits by U.S. authorities in recent years already had winnowed the list of platforms catering to U.S. consumers. There’s Coinbase, Kraken, Gemini, and Bittrex, among a few others. There’s also Binance.US, which says it’s separate from the global Binance platform and has licensed the name and some technology from Binance.
Coinbase Global Inc. published audited financials and beefed up its compliance operations as it listed shares in New York this year.
Kraken got a regulated bank charter in Wyoming as it, too, prepares to go public. And Gemini’s parent, Gemini Trust Co., helped create the Virtual Commodity Association, which is supposed to root out bad behavior and prevent fraud and manipulation—reminiscent of the self-regulatory groups set up by Wall Street. As another Gemini poster put it: “Crypto needs rules.”
The idea is that if an exchange appeases U.S. authorities, it can probably operate just about anywhere and more easily lure institutional investors, such as hedge funds, family offices, and pension funds. But with each step a platform takes, it goes further toward emulating the staid financial world, where internal controls, industry groups, and regulators hold sway.
“The Catch-22 is that the crypto system was set up to avoid big banks,” says John Griffin, a professor of finance at the University of Texas at Austin’s McCombs School of Business. But “rather than having this autonomous universe free of government regulation, we have crypto exchanges playing the role that traditional exchanges and governments play in traditional markets.”
There’s already a rich history of boom and bust in the relatively new world of crypto exchanges—and plenty of reason for traders to be worried about who they can trust with their assets. Mt. Gox is the most famous example. The Japan-based platform imploded in 2014 after losing the coins of thousands of customers.
Quadriga CX abruptly shut in 2019, owing clients hundreds of millions of dollars in crypto. The three founders of Seychelles-incorporated BitMEX, once the biggest crypto derivatives exchange, were charged by U.S. prosecutors in 2020 with flouting banking laws intended to ensure that the platform isn’t used for illegal purposes while serving U.S. customers. All three have pleaded not guilty.
Binance Holdings vaulted from unknown to a powerhouse a few years ago and has sat high on global rankings ever since. This year, as the Biden administration settled in, probes emerged. The U.S. Department of Justice, the Internal Revenue Service, and the Commodity Futures Trading Commission are all said to be examining aspects of the business, according to Bloomberg News. The specifics of the inquiries are unknown, but they’ve included officials who look into whether companies have allowed money laundering. The company hasn’t been accused of any wrongdoing.
“As Binance.com continues to grow, we remain committed to working collaboratively with regulators around the world,” the company said in a statement provided by a spokesperson. “We take our legal obligations very seriously and we continue to invest in our compliance program.” The company said that includes building robust systems for catching money laundering and the hiring of former government officials to advise it on regulatory and compliance matters.
Binance remains the global venue to beat. Its daily spot trading volume is more than 100 times that of Gemini’s, according to CoinMarketCap, which is owned by Binance but generally is considered the leading source of crypto trading data. But even a midsize exchange can be worth billions. The Gemini exchange is worth $4.1 billion, according to estimates by the Bloomberg Billionaires Index.
Coinbase sports a market value of more than $50 billion, making co-founders Brian Armstrong and Fred Ehrsam both billionaires. Kraken’s value is around $20 billion, based on secondary sales of its private shares. And Mike Novogratz, chief executive officer and founder of Galaxy Digital Holdings Ltd., which operates an over-the-counter trading desk, has a $3.6 billion stake in that company.
With new cryptocurrencies emerging daily, one of the biggest conundrums facing exchanges is deciding which ones to allow users to trade. Listings sometimes require technology upgrades and time to vet whether coins run afoul of laws, says Dave Ripley, the chief operating officer of Kraken.
But restraint can leave an exchange’s risk-loving users on the sidelines when hot coins take off. For example, Coinbase started trading Dogecoin only in June, years after the token’s creation in 2013 and several weeks after its market value soared over $90 billion. The price has since tumbled.
Binance US ‘Looking At IPO Route,’ CZ Says
Binance is set to face heavy regulations in the future with the mindset of shifting from a tech startup to a financial service, Changpeng Zhao said.
Binance US, a United States-based cryptocurrency exchange operating separately from Binance, is looking to go public despite the ongoing regulatory crackdown on Binance.
Changpeng Zhao, founder and CEO of the global exchange Binance, talked about its ongoing regulatory issues and future plans at the blockchain virtual summit REDeFiNE Tomorrow 2021 on Friday.
The CEO expressed confidence that Binance is set to face heavy regulations in the future, noting that the company “is in the mindset of shifting from a tech startup to a financial service.” Zhao reiterated that Binance had been aggressively increasing its compliance efforts, including hiring former regulators.
Zhao admitted that the company’s efforts to cooperate with regulators have not been the firm’s “strong suit,” pointing out the urgent need to localize compliance communications.
But despite seeing a meager success in communicating with global regulators so far, Binance doesn’t preclude a possibility that Binance US would go public one day as the exchange is seeking ways to go for an initial public offering (IPO), CZ declared, stating:
“Binance US is looking at the IPO route. Most regulators are familiar with a certain pattern, or having headquarters, having corporate structure. But we are setting up those structures to make it easier for an IPO to happen.”
Launched in 2019, Binance US operates a separate entity from Binance, licensing technology and receiving branding support from the global exchange. Brian Brooks, the former acting comptroller of the United States Office of the Comptroller of the Currency, became the CEO of Binance US earlier this year to help the exchange compete with Coinbase exchange and expand across the United States.
Binance has been subject to increased scrutiny from global regulators recently, including the United States. As previously reported, both the States Department of Justice and the Internal Revenue Service have been investigating Binance for alleged illegal trading activity involving users in the United States. In March, Binance reportedly became the subject of an investigation by the U.S. Commodity Futures Trading Commission regarding alleged trades by U.S. customers.
Binance’s CZ Is Looking For His Replacement As Exchange Gets Regulatory House In Order
“We are looking for someone with a strong regulatory background to step in and be CEO,” Changpeng Zhao said at a press conference Tuesday.
Binance, the world’s largest cryptocurrency exchange, is looking for someone with a strong regulatory background to become its new chief executive, replacing its charismatic leader Changpeng Zhao, also known as “CZ.”
“There is always a pool of candidates who could succeed me. We are looking for someone with a strong regulatory background to step in and be CEO,” Zhao said at a press conference Tuesday.
Zhao said there was no timeline for his succession and that he would not be stepping down right away.
“I will always contribute to Binance and the BNB ecosystem. I don’t have to be CEO to do that,” he said.
Binance has been lashed by a series of regulatory actions across a number of jurisdictions including the U.K. and Japan. On Tuesday, the company reduced its customer withdrawal limit from 2 bitcoins to 0.06 bitcoins.
Zhao made a point of clarifying that he would be “honored to run Binance as a regulated financial institution,” and that his move, when it comes, would be when a better leader emerges rather than some reaction to the ongoing regulatory clampdown.
As part of the exchange’s plan to address the current regulatory scrutiny, Zhou said Binance is “pivoting from a tech startup to a financial institution,” which will involve opening headquarters, and creating a structure regulators can easily recognize.
“We have a structure that’s relatively hard to understand for regulators. For example, simple things like we don’t have a headquarters,” he told reporters. “So we are now looking to establish multiple headquarters in regional headquarters in different parts of the world. We don’t have specific locations for all of them yet.”
Zhao acknowledged Binance’s communications with regulators in the past “have not been the best,” adding that the plan now is to hire ex-regulators and “become licensed everywhere.”
Asked by CoinDesk if a reported U.S. probe into Binance had kicked off a coordinated swoop on the exchange across multiple jurisdictions, Zhao said he did not know.
“No one has told us this is a coordinated effort, so we don’t know,” he told CoinDesk.
Binance Cuts Withdrawal Limits, Rolls Out Tax Reporting Tool
Existing Binance users will be unable to withdraw more than 0.06 BTC per day without completing full KYC verification, effective in August.
Binance, the world’s biggest cryptocurrency exchange by trading volumes, continues its efforts to maintain dialogue with global regulators by introducing withdrawal limits and a new tax reporting system.
The company officially announced Tuesday a major update to its Know Your Customer policies, significantly reducing maximum withdrawal amounts for users who have not completed full identity verification.
Effective immediately for new Binance accounts, users who have completed only basic account verifications will be unable to withdraw more than 0.06 Bitcoin (BTC) per day, worth roughly $2,400 at the time of writing. Previously, the maximum daily withdrawal amount was capped at 2 BTC, or about $80,000, Binance CEO Changpeng Zhao noted on Twitter.
According to the announcement, Binance will continue applying new withdrawal limits for existing users in phases starting from Aug. 4. The exchange expects to have adopted new withdrawal restrictions entirely by Aug. 23. Binance users who have completed full identity verification will be still able to withdraw up to 100 BTC in a day, or nearly $4 million at BTC prices at the time of writing. “Withdrawal limits refresh daily at 00:00 AM,” the announcement notes.
Binance also rolled out its new tax reporting tool on Wednesday. The reporting system is an Application Programming Interface that enables Binance users to track their crypto transactions, transfer their transaction history to third-party vendors, and obtain instant overviews of their local tax liabilities. The new initiative is part of the exchange’s broader strategy to expand user protection and risk management protocols.
According to Binance’s tax reporting instruction page, users can now select a third-party tax tool to transfer their transaction history. “Binance is not endorsing any particular third-party tax tool software. Please exercise your own discretion and/or consult your personal tax adviser based on your personal tax circumstances and requirements when selecting the third-party tax tools,” the exchange warned.
Binance did not immediately respond to a request for information on the usage of the new tool for Binance US users.
The news comes amid Binance aggressively adopting new trading restrictions in an apparent effort to respond to the ongoing global regulatory crackdown on the exchange. This week, the exchange delisted margin trading pairs for three fiat currencies, including the euro, the Australian dollar and the British pound sterling. Binance’s futures trading platform has also started reducing maximum leverage positions from 125x to 20x.
Zhao also hinted Tuesday that he might be willing to step down as CEO should someone “with a strong regulatory background” be available. “There are no immediate plans to replace me as CEO,” he noted.
Indian Authorities To Question Binance On Laundering Of Betting Proceeds
The Enforcement Directorate is investigating Chinese-operated betting apps that have collected more than $134 million over the last 10 months.
Authorities in India are investigating whether Binance’s WazirX was used in a money-laundering operation related to betting apps that have collected more than $134 million in the past 10 months, Bloomberg reported Friday.
* The country’s anti-money laundering agency, the Enforcement Directorate, wants to question Binance executives and is awaiting their response, Bloomberg said, citing unidentified people with knowledge of the issue.
* The Enforcement Directorate is investigating Chinese-operated betting apps that allegedly laundered some of these funds through the Binance-owned crypto exchange. Binance acquired WazirX in 2019.
* A Binance spokesperson said the company itself had not been contacted by any authorities in the matter. “We did not receive any summons in June or July of this year,” the spokesperson said. “As per available info in the public domain, the summons was directed to only WazirX.”
Binance Banned In Malaysia, Given 14 Days Notice To Shut Down Operations
The crypto exchange has been served with a notice to stop offering its services in the country.
Malaysia is the latest regulatory theater to come after Binance as authorities in the country have accused the exchange giant of continuing to operate in the country illegally.
According to an announcement released on Friday, the Securities Commission (SC) Malaysia has served a public reprimand against Binance, calling for the exchange and all of its entities to cease operations in the country.
The SC stated that Binance continued to operate in Malaysia despite previous warnings. Indeed, back in July 2020, Cointelegraph reported that Binance was not permitted to operate in Malaysia.
At the time, the SC published an “Investor Alert List” containing several digital asset exchanges offering services in the country without due authorization from Malaysian regulators.
Binance has 14 business days from Tuesday to comply with the order that includes disabling its website and mobile apps, as well as discontinuing any media campaign for its services in the country.
The announcement also mandated that Binance’s CEO, Changpeng Zhao, ensures full compliance with the order. Malaysia’s securities regulator also urged citizens to desist from trading with crypto exchanges operating in the country illegally.
Responding to Cointelegraph’s request for comments, a spokesperson for the exchange explained that Binance.com does not operate out of Malaysia, adding:
“Binance takes a collaborative approach in working with regulators in navigating this emerging industry and we take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules and laws in this new space.”
The news out of Malaysia concerning Binance is only the latest in sweeping regulatory actions specifically targeted at the exchange giant. From warnings to investigations and now outright bans, the platforms appear to be under the cosh of financial watchdogs across the globe.
Earlier in July, Italy’s financial regulator issued a warning against Binance, stating that the platform was not authorized to offer services in the country. Apart from Italy, countries like Germany, Poland, Japan, Thailand, Singapore, the United States and the United Kingdom, among others, have also issued warnings about Binance.
Binance, for its part, has taken steps to mitigate the situation, with its CEO promising to work with regulators amid plans for even further expansion across the globe. There has also been a flurry of policy changes at the exchange with withdrawal limits reduced for users who are yet to complete the platform’s identity verification protocols.
Meanwhile, the exchange has also announced plans to shut down crypto derivatives trading in Europe, beginning with Germany, Italy and the Netherlands.
Binance To Shut Down Crypto Derivatives Trading In Europe
Binance moves to suspend derivatives trading in Europe, starting with Germany, Italy and Netherlands.
Troubled global cryptocurrency exchange Binance continues moving fast in curbing services to respond to the ongoing regulatory scrutiny worldwide, partly shutting down derivatives trading.
Binance officially announced Friday that it would suspend its derivatives trading across the European region, starting with Germany, Italy and the Netherlands. The company clarified that users in mentioned countries cannot open new futures accounts on Binance effective immediately.
We’re continually evaluating our products and working with our partners to meet our users’ needs.
Today we’re announcing that we plan to wind down our derivatives products offerings across the European region, commencing with the Netherlands, Germany, and Italy.
— Binance (@binance) July 30, 2021
Binance added that the exchange doesn’t actively market futures and derivatives products locally, and it plans further to scale down access to these products in the region. “The European region is a very important market for Binance, and it is taking proactive steps towards harmonizing crypto regulations, which is a positive sign for the industry,” Binance wrote.
The exchange noted that the latest move aligns with Binance’s commitment to engage in a constructive dialogue with global regulators regarding local requirements. Cointelegraph reached out to Binance and will update the story.
Binance’s latest suspensions follow a series of new trading restrictions amid the company facing massive pressure from global regulators, including those in Germany and Italy. In mid-July, the Italian Companies and Exchange Commission said that Binance Group and affiliated companies were unauthorized to provide investment services and operate in the country. About a dozen other global financial authorities in countries such as the United States and the United Kingdom have posted related warnings in recent months.
In line with the company’s commitment to collaborate with regulators to offer its services legally, Binance has been actively limiting its services, delisting margin trading pairs for three fiat currencies and curbing maximum leverage positions from 125x to 20x earlier this week. Binance is also preparing to cut daily withdrawal limits from 2 Bitcoin (BTC) to 0.06 BTC in August.
Despite Binance’s mounting regulatory challenges worldwide, the company’s CEO, Changpeng Zhao, apparently remains optimistic about the future of the cryptocurrency exchange. Last week, Zhao disclosed Binance US, a U.S.-based cryptocurrency exchange operating separately from Binance, is looking to go public.
“Binance US is looking at the IPO route. Most regulators are familiar with a certain pattern or having headquarters, having corporate structure. But we are setting up those structures to make it easier for an IPO to happen,” Zhao said.
Binance To Restrict Derivatives Trading For Hong Kong Users
Binance is yet to announce an official date for imposing restrictions on derivatives products for Hong Kong users.
Stepping up efforts to minimize the inherent risks of trading cryptocurrency, major crypto exchange Binance has announced it would restrict access to derivatives products to Hong Kong users. The official announcement reads:
“Users from Hong Kong will have a 90 days’ grace period to close their open positions. During the grace period, no new positions may be opened.”
However, Binance’s proactive means to restrict Hong Kong users was not supported by a date of when the restrictions will be imposed. To provide clarity behind Binance’s latest restrictions, CEO Changpeng Zhao said the move is aimed to be a “proactive measure” for establishing “crypto compliance best practices worldwide.”
Zhao Also Summarized Hong Kong-Related Developments, Stating:
“New Binance users from Hong Kong can no longer open futures accounts and we will wind-down access for existing users.”
While Binance’s proactive ban on Hong Kong users may tend to protect new users, the development seems to be more in line with China’s increased crackdown on crypto business with no exception on exchanges, mining or token offerings.
Binance continues to face regulatory challenges across multiple countries for allegedly offering a platform for illegal trades. In an effort to keep doors open for business, Binance is reportedly on a quest to stop offering high-risk services. As of the latest, the crypto exchange announced the suspension of derivatives trading in Europe, starting with Germany, Italy and the Netherlands.
As Cointelegraph reported, the move signaled Binance’s proactive steps toward harmonizing crypto regulations. However, the Securities Commission Malaysia asked Binance to shut operations within its region completely. Binance was reportedly operating within the Malaysian jurisdiction despite no authorization from the government.
Adding to the mix, Germany’s financial watchdog, the Federal Financial Supervisory Authority, aka BaFin, has also warned Binance of facing heavy fines on the grounds of selling shares in Germany in the form of “share tokens” without offering the necessary prospectuses.
Binance Crypto Exchange Outage Sparks Outrage As Traders Lose Millions
Binance’s policy allows investors to get compensation on trading losses due to system or internal issues but does not cover the “what could have been” situations.
Outages in crypto exchanges have resulted in losses for investors trying to get out in time. While Binance has been proactive in neutralizing such situations, numerous investors are reportedly seeking damages due to the exchange’s inoperability.
Speaking to CNBC, a Binance spokesperson highlighted the company’s policy that promises to compensate actual trading losses due to system or internal issues, but noted:
“We do not cover hypothetical ‘what could have been’ situations such as unrealized profits.”
In some cases, when investors reached out for compensation in relation to the said outage, Binance’s customer service team reportedly offered a low rebate while refusing to comment on “pending legal matters.”
Back on Feb. 11, Binance had to temporarily go offline after suffering an outage due to a 60% spike in its web traffic. As a result, the exchange suspended “deposits, withdrawals, spot and margin trading, P2P trading, OTC Portal trading, savings & redemption, as well as asset transfers from sub-accounts, margin accounts, futures accounts, and fiat wallets.”
Binance has recently caught the attention of regulators across the world in relation to trading and licensing complexities. Binance CEO Changpeng Zhao has stated his intention to get licensed in every jurisdiction.
Zhao publicly offered Binance’s CEO position to a person “with a strong regulatory background.” Currently, Binance is facing regulatory scrutiny from authorities across the world, including the Netherlands, Malaysia and South Korea.
Aimed at damage control, Binance has proactively started implementing restrictions to lower the chances of high-risk trading — from limiting high-leverage trading to completely restricting derivatives trading.
Dutch Central Bank Claims Binance Is Operating Illegally
The warning follows authorities in several countries issuing statements warning investors to exercise caution in regards to Binance, or claiming the exchange was operating illegally.
De Nederlandsche Bank, the central bank of the Netherlands, issued a warning to Binance Holdings Limited and its entities offering crypto services to local residents.
In a Wednesday statement, De Nederlandsche Bank said the major crypto exchange was not operating in compliance with the country’s Anti-Money Laundering and Anti-Terrorist Financing Act, alleging that Binance customers were at risk of “becoming involved in money laundering or terrorist financing.” According to the central bank, Binance is illegally offering crypto services as well as custodian wallets without the required legal registration.
The Dutch central bank specified that its notice was to the crypto exchange’s parent company Binance Holdings Limited as well as entities “under which Binance provides crypto services in the Netherlands.” This would seemingly apply to the global crypto exchange as well.
In a statement to Cointelegraph, a Binance spokesperson said the crypto exchange “is in the process of submitting an application for the required registration” and “will be working constructively” with the central bank to meet its requirements.
“It is key to Binance that our users’ interests continue to be protected,” said the spokesperson. “Although we are not formally registered with [De Nederlandsche Bank] yet, we have a robust compliance program that incorporates tools and procedures to combat money laundering and terrorist financing.”
The warning comes following financial watchdogs in different countries saying Binance Holdings Limited is not authorized to provide certain services to their residents. Authorities in Italy, Malaysia, Poland, Germany, the United Kingdom, the Cayman Islands, Thailand, Canada, Japan and Singapore have issued statements warning investors to exercise caution in regards to Binance, or claiming the exchange was operating illegally.
In a Tuesday Bloomberg interview, Binance CEO Changpeng Zhao said most of his attention was focused on ensuring that the exchange was in compliance with local regulators in its move to be a financial institution rather than “the day-to-day operations of the exchange.” Zhao has previously hinted he would be willing to accept “a senior person with a strong compliance background” to eventually replace him as CEO.
“We’re going through a pivot from a technology innovator into a financial services company so we need to be fully compliant,” said Zhao. “I believe right now all the regulators around the world view crypto as financial instruments.”
“We need to apply for licenses and it’s very important for us to communicate with the regulators’ request for regular meetings where we proactively update them on what we do.”
Former US Treasury Official Joins Binance To Lead AML Efforts
Former IRS supervisor Greg Monahan replaces Karen Leong as the global money laundering reporting officer of Binance.
Former United States Treasury Criminal Investigator Greg Monahan joined major cryptocurrency exchange Binance to oversee the company’s international Anti-Money Laundering (AML) efforts, the exchange announced on Wednesday.
Before replacing Karen Leong as the global money laundering reporting officer at Binance, Monahan worked for the U.S. Treasury for almost 20 years as a member of the Internal Revenue Service’s criminal investigation unit. He was mainly responsible for tax, money laundering and other related financial crime investigations. He also held a brief position at Deloitte as a senior manager, according to his professional profile.
Reminding previous efforts of the exchange to support high-profile investigations, Monahan said that his efforts would be focused on Binance’s AML and investigation programs, “as well as strengthening the organization’s relations with regulatory and law enforcement bodies worldwide.”
Binance said that its international compliance team and advisory board have grown by 500% since 2020. Changpeng Zhao, CEO of Binance, noted that the team is expanding its capabilities “to make Binance and the wider industry a safe place for all participants.”
Leong will remain at Binance as a director to promote the compliance efforts within the organization, the announcement reads.
Binance is ramping up its compliance and AML efforts in a bid to make peace with regulators, who are accusing the exchange of illegal operations within worldwide. Zhao recently shared the company’s vision to be licensed everywhere. “From now on, we’re going to be a financial institution,” he summarized.
After limiting leverage trading to 20x on its futures platform, Binance recently rolled out a tax reporting tool to give its users a way to overview their tax liabilities.
The exchange is also known to make prominent hires to boost up its efforts in different areas. Last year, Binance hired former HSBC executive Teana Baker-Taylor to lead its expansion in the United Kingdom and European market. Since then, HSBC UK has reportedly suspended credit card payments to Binance.
Binance Hires U.S. Cybercrime Expert For Money Laundering Role
Binance has named Greg Monahan, a former U.S. government criminal investigator, to lead global money laundering reporting at the cryptocurrency firm.
Monahan will be based in Washington and be responsible for an existing team, according to the world’s biggest crypto exchange. He spent the bulk of his career in the U.S. government, leading cybercrime investigations at the Internal Revenue Service.
Binance is facing mounting scrutiny in Washington, including a probe by the Department of Justice and IRS into potential illicit activities. The crypto industry — which is largely unregulated — is also bracing for new rules, such as IRS requirements on reporting crypto transactions.
“My efforts will be focused on expanding Binance’s international anti-money laundering and investigation programs, as well as strengthening the organization’s relations with regulatory and law enforcement bodies worldwide,” said Monahan, who worked most recently at Deloitte Financial Advisory Services LLP, in a statement.
In recent months, Binance has devoted considerable resources to loading up on hires with government experience, including former executives from the Financial Action Task Force — an international standard-setting group devoted to combating money laundering — and Max Baucus, a former Democratic Senator.
Such personnel moves are a common strategy for financial firms targeted by investigations or major enforcement actions from regulators. In some cases, companies have been known to hire people straight from the agencies scrutinizing them.
“We are always expanding our capabilities to make Binance and the wider industry a safe place for all participants,” said Binance Chief Executive Officer Changpeng “CZ” Zhao in the statement.
Karen Leong, who has held the top anti-money laundering role at Binance since 2018, will become a director of compliance, the firm said.
Canadian Regulator Alleges Okex Operator Violated Securities Law
The commission has made similar allegations against Bybit, crypto exchange KuCoin and Polo Digital Assets.
The Ontario Securities Commission claimed Aux Cayes FinTech Company Limited, a legal entity in the Republic of Seychelles that operates crypto exchange OKEx, has failed to comply with the province’s law governing securities.
In Wednesday’s notice, the Ontario Securities Commission, or OSC, alleged that Aux Cayes may have engaged in illegal activity and could face regulatory action if it fails to cooperate with authorities. According to the OSC, the crypto asset products offered through OKEx are considered securities and derivatives, and subject to the Ontario securities law. The regulator claims Aux Cayes has failed to comply with the region’s registration and prospectus requirements.
The OSC issued a warning to all crypto-asset trading platforms operating in the province in March that they must be in compliance with the securities law by April 19 or face regulatory action. Though the regulator’s enforcement team said Aux Cayes did respond to limited inquiries in June, the platform failed to provide “basic information about its Ontario clients,” including the number of accounts and aggregate holdings. At the time, OKEx issued a notice to users in Ontario and Quebec, saying they “shall not access any of the services” on the platform.
The enforcement team is recommending that the OSC order Aux Cayes to cease all crypto trading, be prohibited from acquiring any securities and potentially pay millions of dollars in penalties and disgorgement fees. According to Thursday’s notice, the agency has scheduled a hearing for Sept. 15 to address the allegations.
The commission has made similar allegations against Bybit, crypto exchange KuCoin and Polo Digital Assets, the parent company of Poloniex. In all cases, the OSC alleges that the platforms failed to contact the securities regulator by the April 19 deadline and were in violation of the securities law. Major crypto exchange Binance announced in June it would cease providing services to users located in Ontario.
Binance.US To Close Funding Round With ‘Reputable Investors’
Binance.US is expecting to close a funding round shortly, Binance Chief Executive Officer Changpeng Zhao said in a statement to Bloomberg.
“There is significant interest from top-level investors, and they expect they will close a round shortly,” Zhao said.
Binance.US, the exchange serving U.S. investors, “will have a diverse cap table with reputable investors and an independent board with proper governance, including the addition of new outside investors and independent members,” Zhao said.
The funding round would come soon after recently hired CEO of Binance.US, Brian Brooks, resigned from the company. The New York Times reported earlier that Brooks was looking to raise at least $100 million from investors.
Binance is also being probed by a number of regulatory agencies worldwide. Despite that, Zhao said he expects to move ahead with taking Binance.US public. Rival Coinbase Global Inc. went public earlier this year and a number of other crypto exchanges are mulling a similar move, as the number of people interested in cryptocurrencies continues to swell.
“Binance.US also aims to IPO in the not too distant future,” Zhao said. “It’s just a matter of time.”
While Binance.US says it’s independent of Binance, the world’s biggest crypto exchange, the exact ownership structure is unclear.
Singapore Issues Investor Alert For Binance
The crypto exchange is unregulated in Singapore and may have broken the law, according to the city-state’s financial watchdog.
The Monetary Authority of Singapore issued an investor alert for Binance’s global website, according to the central bank and regulator’s site.
* The list includes entities that are unregulated by the MAS but that may be erroneously perceived as licensed or regulated, the agency said.
* The MAS subsequently said Binance may have breached Singapore’s Payment Services Act by providing payment services to and soliciting business from residents of Singapore, Bloomberg reported. The authority ordered Binance to stop such activities immediately, according to the report.
* In early July, MAS said that it would “follow up” with Binance’s Singapore entity, which at the time was waiting for the review of its license application.
* In an emailed statement to CoinDesk on Thursday, Binance, the world’s largest crypto exchange by trading volume, said it is aware of the notice and is “actively working” with the MAS to address the watchdog’s concerns.
* In late August, Binance hired Richard Teng, the former CEO of Abu Dhabi’s financial watchdog, to head its Singapore operations, possibly to curb the regulatory tide against it.
* Binance has been in regulators’ crosshairs all around the world in recent months, including in Japan and the U.K.
* Singapore’s 2019 Payment Services Act requires crypto companies to be licensed to operate in the city-state.
* The law has been perceived as largely positive toward the industry, because it creates a comprehensive legal framework under which crypto companies can operate. Hundreds of companies have applied for the licenses, and the MAS has started granting the coveted certifications.
* On Wednesday, the MAS issued a digital token payments license to local fintech firm FOMO Pay.
South Africa’s Financial Regulator Issues Warning Against Binance
South African authorities are the latest to warn against using Binance, saying the exchange is not authorized to operate in the country.
South Africa’s Financial Sector Conduct Authority (FSCA) has warned the country’s public against dealing with crypto exchange platform Binance.
In a statement issued on Friday, the FSCA stated that Binance Group, an “international company” domiciled in Seychelles, was not authorized to render financial services in the country. Binance is headquartered in the Cayman Islands and Seychelles.
As part of the warning, the FSCA indicated that South Africans were using a Telegram group to gain access to Binance’s crypto exchange services in the country.
In addition to the warning against using Binance, the financial regulator also reminded South Africans that crypto investments are not regulated in the country. “As a result, if something goes wrong, you’re unlikely to get your money back and will have no recourse against anyone,” the FSCA statement adds.
The FSCA also enjoined the South African public to confirm the registration status of entities in the financial and investment space before doing business with such companies.
Binance did not immediately respond to Cointelegraph’s request for comments on the matter.
The statement by the FSCA is only the latest in a series of warnings and outright bans against Binance by financial regulatory authorities in several jurisdictions.
On Thursday, the Monetary Authority of Singapore ordered Binance to stop offering services in the country over a potential infringement on payment regulations.
Back in August, the Dutch Central Bank alleged that Binance was operating illegally. The crypto exchange giant has come under intense scrutiny from regulators in places like Italy, Japan, Thailand, the United States and the United Kingdom, to mention a few.
For its part, Binance has stressed its willingness to cooperate with regulators and has even enacted a mandatory identity verification scheme for all users.
Binance Pushes Back Against Warning From South Africa Regulator
Though the FSCA is an agency of the South African government, Binance claimed the country’s Financial Intelligence Centre was the “major regulator” with which it had been working to be in compliance with local laws.
In response to a warning from South Africa’s Financial Sector Conduct Authority, major cryptocurrency exchange Binance has said it is in compliance with local regulators and is not offering financial advice or intermediary services to residents.
In a Friday statement from Binance, the crypto exchange implied the warning from the Financial Sector Conduct Authority, or FSCA, lacked authority because the group does not have the power to regulate “crypto-related investments” in South Africa. The exchange also pushed back against allegations that South Africans used the Binance South Africa Telegram group to access services for the crypto exchange, saying the online community promoted blockchain education, but did not provide financial advice or services.
Though the FSCA is an agency of the South African government, Binance claimed the country’s Financial Intelligence Centre was the “major regulator” with which it had been working to be in compliance with local laws. According to the exchange, it has contacted the FSCA for clarification as to its Sept. 3 warning and to address any potential concerns regulators may have regarding Binance.
“Binance.com is registered with the FIC as a voluntary self-disclosure institution,” said the exchange. “Binance complies with the FIC Act obligations relating to establishing and verifying of clients’ identities, record keeping and reporting suspicious or unusual transactions.”
In its warning, the FSCA urged the South African public to exercise caution in any investments involving Binance Group, which it described as an “international company” domiciled in the Seychelles. However, according to Binance’s response, the company has no associated entity under that name in the archipelago nation.
South Africa’s policy on crypto has been seemingly standoffish until recently, when local regulators announced they would be reevaluating their stance on digital assets. The country’s Intergovernmental Fintech Working Group said in July it would be laying the groundwork for the “phased and structured” regulation of cryptocurrencies in South Africa. However, the FSCA has sometimes cited cryptocurrency scams and financial risks to promote stricter regulations.
The FSCA warning comes following financial regulators in different countries have said Binance’s parent company or its affiliates are not authorized to provide certain financial services to their residents. Authorities in Italy, Malaysia, Poland, Germany, the United Kingdom, the Cayman Islands, Thailand, Canada, Japan and Singapore have issued statements warning investors to exercise caution in regards to Binance, or claiming the exchange was operating illegally.
Crypto PAC Nets $400K In February From BlockFi CEO, CNBC Contributor And More
Another wave of crypto executives contributed to GMI PAC last month as midterm elections approached.
Crypto political action committee (PAC) GMI landed big-dollar contributions from more industry high-rollers last month, entering March with $3.4 million on hand, filings show.
BlockFi CEO Zac Prince, venture firm Blockchain Capital (via founders Bart and Brad Stephens) and crypto investor Brian Kelly, a frequent CNBC contributor, donated $400,000 to GMI PAC in February. Kelly himself donated $250,000.
They’re the latest bigwigs to back what is fast becoming a hub for the crypto industry’s political donations. Anthony Scaramucci’s SkyBridge hedge fund, trading firm FTX, venture fund Multicoin and data hub Messari have also backed GMI (a nod to the crypto slang “gonna make it”), which was formally organized in September.
Disclosed in a Friday regulatory filing, the latest contributions shed some light into crypto’s battle for Capitol Hill.
Super PACs can plow millions into ad campaigns to boost candidates. They offer the wealthy a gilded pathway to political influence that federal campaign contribution limits would otherwise restrict.
Crypto billionaire Sam Bankman-Fried, for example, gave $2 million to GMI PAC in mid-January, according to Federal Election Commission (FEC) data. That’s orders of magnitude more than he could have contributed directly.
The FTX founder was one of President Joe Biden’s single largest backers (via PACs) during the last election cycle.
FEC data shows GMI PAC hasn’t spent its war chest on any candidates, unlike an affiliated PAC called Web3 Forward that received $1.5 million from GMI last month.
Jasmine Crockett, a Texas Democrat running for a deep-blue House of Representatives seat representing the Dallas area, benefitted from a $2 million Web3 Forward-funded ad blitz ahead of her primary race last month. She nearly clinched the seat but is headed to a run-off in May.
Crypto’s influence campaign didn’t sit well with everyone in Dallas.
“The cryptocurrency special interest Super PACs shouldn’t fly under the radar with massive amounts of spending in the closing days of a hotly contested primary in Texas,” former Congressman Martin Frost wrote in a Feb. 20 opinion piece for the Dallas Morning News.
Meanwhile, Texas Justice Fund, a PAC aligned with Crockett’s rival in the primary, Jane Hamilton, sponsored a radio ad smearing ties to “out-of-state crypto fat cats.”
Whether crypto PAC ad buys will help or hurt their intended candidates remains to be seen.
What Is Driving Institutions To Invest In Crypto? BlockFi’s David Olsson Explains
“Out of the 80% of Top 50 hedge funds in the world we’ve spoken to, they all are embarking on some sort of crypto journey,” says Olsson.
In an interview with Cointelegraph reporter Joe Hall last Tuesday, David Olsson, global head of institutional distribution at BlockFi, shared his insight on the state of institutional adoption of cryptocurrencies.
BlockFi is a financial services company that offers retail wealth management products, such as crypto-backed loans, interest accounts, Bitcoin rewards credit cards, etc.
Meanwhile, for institutional investors, BlockFi’s proprietary platform provides financing for capital efficiency, the ability to borrow coins for hedging and shorting, and institutional-grade trading infrastructure.
When asked about any exciting trends among institutional clients adopting crypto, Olsson told Cointelegraph, “Out of the 80% of Top 50 hedge funds in the world we’ve spoken to, they all are embarking on some sort of crypto journey, such as starting a trading desk or investing in crypto native firms run by 25 to 30-year-olds that know how to extract alpha from crypto markets and manage the risks.”
“It really is a generational story. The early asset managers don’t have the natural, digital native perspective of someone that’s younger. But we see a tremendous amount of interest.”
Olsson told Cointelegraph that hedge funds have been preparing for quite a while to venture into crypto, given the significant increase in liquidity and institutionalization of the space over the years.
According to a study conducted by Fidelity last year, 70% of surveyed financial institutions plan to invest in crypto in the next year, while 90% said they plan to do so in the next five years.
“Bitcoin has returned more than 100% per year on avg. over the last 10 years, compared to around 10% per year for equities in the U.S. So it’s just becoming too big in terms of mindshare for people to ignore,” Olsson added.
“Crypto can fix the plumbing of the financial system worldwide, starting with eliminating expensive fees from banks.”
But Olsson also pointed out that some institutions don’t feel 100% comfortable, as jurisdictions with high liquidity for crypto don’t always have the regulation to back them.
“For adoption to increase, you need an institutional infrastructure, which means KYC [Know Your Customer], AML [Anti-Money Laundering] mechanism, which means financial transparency, cyber security, all the things that clients care about.”
As Cointelegraph previously reported, demand from major investors could still be running high, with 30,000 BTC moved off Coinbase on Friday.
Cipher Mining, WindHQ Joint Venture Secures $46.9M Loan From BlockFi
The Alborz JV will use the proceeds to purchase S19j Pro crypto mining rigs for its 40 megawatt data center in Texas.
Alborz, a joint venture between bitcoin miner Cipher (CIFR) and renewable energy firm WindHQ, received a two-year $46.9 million secured credit facility from crypto lender BlockFi Lending to buy crypto mining rigs, according to a press release.
* Proceeds will be used to buy Bitmain S19J Pro mining rigs for Alborz’s 40 megawatt (MW) data center in Texas that is powered by a 163MW wind energy source. Once the rigs are delivered, the mining facility will generate approximately 1.3 exahash per second (EH/s) of mining power.
* “This credit facility provides an attractive source of non-dilutive financing at the Alborz data center,” said Tyler Page, CEO of Cipher.
* The deal comes as debt financing has been hailed by Wall Street analysts as a positive catalyst for the miners, given it doesn’t dilute existing investors, unlike an equity raise.
* Cipher was spun off from bitcoin (BTC) mining hardware giant Bitfury in March 2021 and went public via a special purpose acquisition company (SPAC) deal. The shares of Cipher have fallen 37% this year, while the price of bitcoin has dropped 25%.
* Cipher began its mining operations in February of this year at its Alborz data center. By the end of the first half of 2023, the company plans to deploy approximately 445MW of electrical power capacity, according to a recent annual filing.
* The annual filing also shows that Cipher has entered into mining purchase contracts to deliver hashrate of about 8.5 EH/s in 2022, based on agreed delivery schedules with Bitmain and SuperAcme and assuming timely deliveries. Of this mining power, Cipher is expected to own about 7.2 EH/s, with the remainder going to WindHQ.
Crypto Exchange BlockFi Secures $250M Credit From FTX Amid Bear Market
At a time when a significant number of crypto platforms are struggling to remain afloat, BlockFi hopes the new credit line would help them secure user’s funds.
BlockFi, a cryptocurrency exchange and digital wallet service provider, has secured a $250 million credit from leading crypto platform FTX.
— Zac Prince (@BlockFiZac) June 21, 2022
BlockFi has signed a term sheet with FTX crypto exchange to secure a $250 million revolving credit facility. A revolving credit facility is a type of credit that enables you to withdraw money, use it to fund your business, repay it and then withdraw it again when you need it.
Zac Prince, the CEO of BlockFi, confirmed the news in a Twitter thread, claiming the new flow of capital would bolster the firm’s balance sheet and strengthen the platform. Prince said:
“The proceeds of the credit facility are intended to be contractually subordinated to all client balances across all account types (BIA, BPY & loan collateral) and will be used as needed.”
The $250 million credit for BlockFi comes amid the market-wide turmoil that has seen many crypto firms cut their workforces and make crucial changes to their operations to remain afloat. Many crypto platforms also had to shut their operations and pause withdrawals owing to the bearish dominance in the market.
Prince lauded the efforts of his team during the ongoing volatility in the crypto market and stated that the new line of credit will be put toward safeguarding users’ funds across all accounts type.
BlockFi was fined $100 million in February this year for its high-yield interest accounts, which were deemed as security products by the United States Securities and Exchange Commission.
FTX In Talks To Acquire Part Of BlockFi: Report
FTX previously extended a $250 million emergency line of credit to the struggling crypto lender earlier this week.
FTX is in talks to acquire a stake in beleaguered crypto lender BlockFi, The Wall Street Journal reported Friday.
* The potential tie-up would quickly deepen the financial relationship established when crypto exchange FTX extended a $250 million emergency line of credit to BlockFi earlier this week.
* According to the WSJ, the talks are ongoing and no final terms have been reached.
* “BlockFi does not comment on market rumors,” a BlockFi spokesperson told CoinDesk when asked about the report. “We are still negotiating the terms of the deal and cannot share more information at this time. We anticipate sharing more on the terms of the deal with the public at a later date.”
* Sam Bankman-Fried’s trading empire has emerged as a backstop for the crypto industry amid fears of contagion in the falling markets.
* Last week, Alameda Research, the quant trading shop controlled by Bankman-Fried, gave a revolving line of credit to troubled crypto broker Voyager Digital (VOYG) for $200 million in cash/USDC and 15,000 bitcoin.
BlockFi Raises Deposit Rates, Eliminates Free Withdrawals
The rate increases across BTC, ETH, USDT and other crypto deposits come after layoffs at the company and a $250 million emergency line of credit from FTX.
Crypto lending platform BlockFi on Friday announced increases in deposit rates across a range of cryptocurrencies. Alongside, the company lowered withdrawal fees on a number of cryptos while ending a policy allowing one free withdrawal per month. Both new policies are effective July 1.
Early this week, things did not appear to be going well at BlockFi.
After the crypto crash appeared to wipe out the company’s main competitor Celsius, BlockFi was forced to lay off 20% of its staff and turn to Sam Bankman-Fried’s FTX for an emergency $250 million revolving credit facility.
In a filing on Friday, however, BlockFi said it will be increasing deposit rates for BTC, ETH, USDC, GUSD, PAX, BUSD and USDT in July.
— Zac Prince (@BlockFiZac) June 24, 2022
The company cites three factors allowing the rate boost: effective risk management, decreasing market competition and a changing macro yield environment.
Regarding risk management, the firm touted its past conservative rate strategy as giving it the wiggle room today to boost rewards for customers in this market downturn.
As for decreasing market competition, BlockFi noted, “we’ve maintained 100% uptime of our retail platform and institutional lending desk” while others have slowed down or paused those operations.
Turning to the changing macro environment, BlockFi noted that the dramatic rise in U.S. Treasury yields is boosting lending rates, and therefore deposit rates.
In addition to increasing rates, BlockFi said it would be eliminating a policy allowing the free withdrawal of BTC, ETH, and stablecoins once per month. The company will, however, be lowering withdrawal fees on all of those assets.
“In 2022, over 75% of our crypto withdrawals have been honored without any fees,” BlockFi said. “BlockFi was subsidizing this cost for our clients. Due to increased withdrawal demand, we’ve decided to implement a modest fee (maximum of $25) to cover the costs of honoring those requests.”
Today’s news comes alongside reporting from The Wall Street Journal that FTX is in talks to acquire part of BlockFi.
BlockFi Quickly Reverses Plan To Stop Accepting GBTC As Collateral
The troubled crypto lender BlockFi said earlier Tuesday that it would no longer accept shares of the Grayscale Bitcoin Trust as collateral.
A few hours later, the company said in a statement that “We are not saying that we won’t support GBTC as collateral moving forward.”
Crypto lending platform BlockFi, after asserting earlier Tuesday that it would no longer accept shares in the Grayscale Bitcoin Trust (GBTC) as collateral for loans, reversed its position later in the day and issued a statement that, “We are not saying that we won’t support GBTC as collateral moving forward.”
According to a BlockFi representative: “While we don’t currently hold any positions in GBTC and are winding down a couple of loans where GBTC is part of the collateral package, we are not saying that we won’t support GBTC as collateral moving forward.
Like any collateral, we constantly evaluate appropriate collateral haircut ratios and aim to accept as many types of collateral that our client’s hold as possible.”
Earlier in the day, BlockFi had communicated plans to make an official announcement regarding GBTC later this week, according to The Block, which first reported the original news report.
* Responding to a tweet on Monday from CoinShares’ Meltem Demirors – who claimed BlockFi still holds “a ton of GBTC” on its balance sheet – BlockFi CEO Zac Prince said his company “directly holds zero GBTC.” He added there remains a couple of small loans with GBTC as collateral that BlockFi is in the process of winding down.
* Grayscale Investments, the manager of GBTC, is owned by Digital Currency Group, the parent company of CoinDesk.
* The report was confirmed to CoinDesk earlier in the day by a BlockFi representative.
BlockFi Had $1.8B In Outstanding Loans In Q2: Report
Crypto lender BlockFi outlined the total amount of loans and net risk exposure it carried at the end of Q2 2022 and shared how it is managing liquidity and credit risk.
Centralized crypto lender BlockFi disclosed that as of the end of Q2, it had $1.8 billion in outstanding loans from institutional and retail investors and $600 million in “net exposure.”
The disclosure came from its Thursday “Q2 2022 Transparency Report,” where the firm outlined its risks relating to liquidity and credit and shared details on its institutional and retail loan portfolios.
Of the outstanding loans to borrowers — valued at $1.8 billion — the firm reported that $600 million are uncollateralized loans.
Institutional loans accounted for $1.5 billion of the total outstanding loans, while retail loans made up the remaining $300 million. The firm based its holdings and outstanding loan amounts on a Bitcoin price of $19,986 as a reference point.
We’ve just published our Q2 Transparency Report with a breakdown of our total AUM, retail and institutional loans, and how we manage related liquidity and credit risk.
— BlockFi (@BlockFi) July 21, 2022
BlockFi said it has established guidelines to help it “maintain the liquidity necessary to meet all our obligations under our core business activities, which includes institutional and retail borrowing and trading activities.”
Those guidelines stipulate that it will hold at least 10% of the total amount due to clients upon demand in inventory, which will be ready to be returned to clients.
It will also hold at least 50% of owed funds in places that can be retrieved and returned to clients within seven days and will hold at least 90% of the total amounts owed to clients upon demand, either in inventory or in loans that can be called back within one year.
The new liquidity guidelines come a few weeks after BlockFi and crypto exchange FTX.US signed an agreement to send $400 million to BlockFi as a “credit facility” with the option to acquire the firm for up to $240 million based on performance triggers.
The deal came together after major crypto investment enterprise Three Arrows Capital reportedly defaulted on its loan from BlockFi.
In a Wednesday post outlining its risk management, BlockFi explained that it only provides uncollateralized loans to borrowers it considers “Tier 1” clients.
Tier 1 clients are institutional clients who have “a significant capital base, financial statements audited by reputable third parties, and a willingness to be transparent and engaged with” BlockFi.
The clients it considers to be “Tier 2 and Tier 3” clients are not allowed to make uncollateralized loans.
Binance To Train Law Enforcement On How To Stop Crypto Crime
Matthew Price, an executive at the crypto exchange, told CoinDesk TV’s “First Mover” that his firm will work with authorities from around the world.
Binance, the world’s largest cryptocurrency exchange by trading volume, is putting in place a global training program to help stop crypto criminals, Matthew Price, the exchange’s head of intelligence and investigations in the Americas, told CoinDesk TV’s “First Mover” program on Monday,
“It’s the first industry-led initiative to provide training to law enforcement, regulators [and] prosecutors around the world, to tackle financial crimes and crimes that may occur using cryptocurrency,” Price, a former Internal Revenue Service agent, said.
“It’s important to have law enforcement have the ability to investigate these crimes, and one of the ways you do that is [by] demystifying crypto,” Price said. “Explaining how to investigate it, how to request information from cryptocurrency exchanges, how to use that information, how to interpret it and how to work with the industry to tackle the bad actors out there.”
According to a Chainalysis report, the crypto industry lost upward of $200 million in August because of hacks.
Yahoo Finance previously reported that Binance would work with law-enforcement officials to “track and trace suspicious accounts and fraudulent activities,” such as laundering money, distributing child pornography and evading sanctions.
That initiative had been explored “informally for a year,” Price said, explaining that the team then “saw an opportunity” to bring the program to a wider audience, “particularly in jurisdictions that may not have some of the resources or experience in place to investigate,” crypto crime-related cases.
“We work with law enforcement throughout the world,” Price said, noting the exchange is working with authorities in Argentina, Brazil, the Philippines and elsewhere.
Binance Creates Industry Recovery Fund To Help Projects Struggling With Liquidity
Binance CEO Changpeng Zhao clarified that the project is for other potentially strong projects and not FTX, saying that “liars or fraud” would never qualify.
As the effects of the FTX crisis continue to affect the markets negatively, crypto exchange Binance is creating a fund to help potentially strong projects that are having liquidity issues.
In a tweet, Binance CEO Changpeng Zhao said that the fund aims to reduce the cascading negative effects of the collapse of FTX by helping projects that the Binance CEO described as “strong, but in a liquidity crisis.”
While Zhao did not provide all the information on which projects would qualify, he told teams who believe they may fit the criteria to contact Binance Labs, the exchange’s venture capital arm.
He also called upon other industry players interested in co-investing to get in touch with them. “Crypto is not going away. We are still here. Let’s rebuild,” Zhao wrote.
Seemingly confused by the announcement, one crypto community member replied to Zhao’s post, asking why FTX would qualify for the fund.
To clarify, the Binance CEO highlighted that the fund is not for FTX, but for other projects within the crypto ecosystem, adding that “liars or fraud never qualify as strong projects.”
As the crypto markets continue to experience turmoil, a known crypto skeptic started to blame crypto billionaires as the reason for slowing down developments in regulating the space.
United States Representative Brad Sherman said that efforts by “billionaire crypto bros” in lobbying and contributing to campaigns have been successful in deterring meaningful legislation.
Meanwhile, as Cointelegraph previously reported, FTX’s former CEO Sam Bankman-Fried, three former FTX executives and Alameda Research CEO Caroline Ellison are looking for ways to flee to Dubai, United Arab Emirates (UAE).
However, while the plan assumes that the UAE does not have an extradition treaty with the United States, both nations have signed a mutual assistance treaty for dealing with criminals.
BlockFi Denies Rumors That Majority Of Its Assets Were Held On FTX
Although it admitted to “significant exposure,” the crypto lender assured clients that it has “the necessary liquidity to explore all options.”
Crypto lender BlockFi issued an official notice to its clients on Nov. 14 denying rumors that the majority of its assets were on FTX prior to the exchange’s collapse.
According to an update shared by BlockFi, although a majority of its assets were not on FTX, it still has “significant exposure to FTX and associated corporate entities that encompasses obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX US.”
Despite its exposure, BlockFi assured clients that it has “the necessary liquidity to explore all options” and is currently consulting with experts and advisers on how to navigate its next steps.
According to the crypto lender, it is still working on “recovering all obligations owed to BlockFi” but expects that the process may take a while, as FTX is currently working through its bankruptcy process.
With regard to its credit card product, BlockFi shared that it will provide direct details “as and when appropriate.” Meanwhile, the platform said it plans to continue its pause on many activities after determining that it could not operate business as usual in the current market climate.
BlockFi also cautioned its clients to avoid making any deposits to their BlockFi wallets or interest accounts.
On Nov. 11, Cointelegraph reported that BlockFi had halted client withdrawals on its platform as part of a broader limit on platform activity in the wake of FTX’s collapse. The company shared in a Nov. 11 tweet that a “lack of clarity on the status of FTX.com, FTX US, and Alameda” had prevented it from operating normally.
BlockFi’s latest update comes only days after BlockFi’s founder and chief operating officer, Flori Marquez, assured users in a Twitter thread that all BlockFi products were fully operational, as it had a $400 million line of credit from FTX US, which is a separate entity from the global entity affected by the liquidity crunch.
1) All @BlockFi products are fully operational.
— Flori Marquez (@FounderFlori) November 8, 2022