Binance is the world’s largest crypto exchange today in terms of the trading volume daily average of $24B in a data by Coinmarketcap. It was founded by Changpeng Zhao in 2017 and BNB (Binance Coin), the native token of the trading platform has a current total market cap of $62B.
Despite its success today, it was faced with hurdles in the past. Security breaches, system outages, and clashes with regulators were just a few of those obstacles. Everything went well for the largest crypto exchange until a massive crackdown was carried out by regulators worldwide.
An Exchange Under Fire By Regulators
Let’s take a look at the list of countries that have placed Binance under a ban.
- United States
In May, Binance Holdings Ltd. was placed under investigation by the Justice Department and Internal Revenue Service. This is in line with their efforts to curb illegal activities in an unregulated market.
As part of its regulatory compliance, Binance has blocked U.S. citizens from accessing the exchange’s website.
Binance spokeswoman Jessica Jung has commented on the charges hurled against the crypto exchange.
“We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion”
Although she reiterated that the company doesn’t comment on specific matters or inquiries, she further adds:
“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.”
On June 25, Financial Services Agency, Japan’s financial regulator issued a warning against Binance stating that the company is not registered to do business in Japan.
On June 27, Financial Conduct Authority called Binance Markets Limited and the Binance Group to stop all regulated activities for derivatives and securities in the country. It stated that its recent move was mainly due to the high volatility and risk that comes with derivative trading which allows investors to borrow to increase the amount of their investment. A two-day temporary suspension on fiat withdrawals through Faster Payments was implemented by Binance to comply with the issued warning by the FCA.
In April, regulators in Germany has issued a warning against the exchange over stock tokens stating that it is at risk of being fined for offering its securities-tracking digital tokens without publishing an investor prospectus.
On July 30, Binance officially stopped offering futures and derivatives products offerings across the European region, starting with Germany, Italy, and the Netherlands. In a tweet, the platform stated that it is part of its proactive step and complying with crypto regulations. Users from these countries will not be able to open new futures or derivatives products accounts and will be given 90 days after the announcement to close their open positions.
In July 2020, Malaysia’s Security Commission has included Binance in the investors’ alert list. But despite this, regulators claim that it continued carrying out illegal operations in the country.
On July 30, in a press release, the Security Commission has ordered the largest crypto exchange Binance to shut down all its operations in the country. The commission has also warned investors to stop all their transactions with the exchange and urged them to withdraw all their investments immediately. Binance was also ordered to stop all media and marketing activities to investors in the country to restrict them from accessing the exchange’s Telegram channels.
- Hong Kong
In July, Hong Kong’s Securities and Futures Commission (SFC) issued a warning that Binance’s offering of investing in Stock Tokens is not a regulated activity. In line with this, Binance stated that it would no longer allow new users to open futures accounts in Hong Kong while existing users will be given a 90-day period to close their positions.
In April, Thailand’s Securities and Exchange Commission issued a warning to investors against Binance stating that the company is illegal.
“We [SEC] would like to inform that Binance is not yet a licensed digital asset operator under the Digital Asset Business Decree BE 2561 . People and investors must use caution if persuaded to exchange digital assets, accept deposits, transfer, withdraw funds or conduct digital asset transactions.”
In July, SEC filed a complaint with the Thai police against the exchange for allegedly operating without a license and could face a penalty of two to five years imprisonment and a fine of 200,000-500,000 baht ($6,200-15,500) if found guilty.
- Cayman Island
In July, The Cayman Islands Monetary Authority stated that the Binance is not licensed to operate a crypto exchange in the British Overseas Territory. CIMA stated that Binance is “not registered, licensed, regulated or otherwise authorized by the Authority to operate a cryptocurrency exchange from or within” the territory. The financial watchdog further adds that it is currently investigating whether the company or its affiliates “has any activities operating in or from within the Cayman Islands which may fall within the scope of the Authority’s regulatory oversight”.
Although the company is headquartered in Cayman Island, its activities are currently not subject to CIMA oversight. But if it will be concluded that the business falls within regulatory jurisdiction the exchange will require a license to provide virtual asset services.
In July, Consob, Italy’s financial regulatory body has declared Binance as “not authorized.”
“Companies of the Binance Group are not authorized to provide investment services and activities in Italy.”
It has also warned investors to “exercise the utmost caution” before engaging in any transaction involving digital assets. The regulatory body also stated that Binance.com offers high-risk investments like derivatives and stock tokens.
Singapore is another addition to countries that have restricted the crypto exchange. Binance Holdings Ltd., the operator of Binance.com was ordered to stop offering its services after a potential breach of the Payments Services Act, a local payment rule.
The Monetary Authority of Singapore has also added Binance.com to the investor alert list which will serve as a caution to investors that Binance isn’t regulated or licensed to provide any payment services locally.
The crypto exchange halted offering products in Singapore dollars including online support following the warning. It will also take down its app from the country’s Apple and Google pay stores. Users were advised to complete all their Singapore dollar-based trades until Sept 10.
In a report by CNBC, Binance CEO and founder Changpeng Zhao stated that he is willing to step down from his role for his company to become a financially regulated institution.
“We’re going to pivot to be a fully regulated financial institution going forward. ”
He further adds:
“I’ll be honored to continue to run Binance as a regulated financial institution until we find somebody who may do a better job.”
South Africa is the latest country to issue a warning against the crypto exchange. FSCA has stated that Binance Group is not authorized to provide any financial advice or to provide intermediary services”. The company has since halted its operation but it reiterated that it does not control the trading of cryptocurrencies and has “constantly collaborated” with the Federation of Independent Commodities Administrators (FIC).
With Binance under threat by regulators worldwide, how will it have any significant effect on the entire crypto market?