Binance is currently the world’s leading blockchain ecosystem. But despite the platform’s success and rapid growth since its launch in 2017, the company has recently come under fire for allegations that it has been failing to adhere to U.S. financial laws and standards.
U.S. regulators are now seeking a total ban on Binance after accusing the platform of operating illegally within the country. This ban will include restitution and fines in addition to permanent termination of their rights to trading and registration in the United States.
The sought-out ban has come as part of a lawsuit put down by the Commodity Futures Trading Commission (CFTC) – the U.S. government department that investigates and prosecutes commodities fraud – against the platform.
What Is Binance Being Accused Of?
Binance is currently under investigation by the CFTC which claims that the firm has bred its business in the U.S. without adhering to its proper rules of registration.
Furthermore, the CFTC has charged the crypto trading platform with breaking U.S. regulations on money laundering.
Binance has defended its case by claiming that its business was coherent with U.S. government standards. The platform attested that they made “significant investments” to introduce measures ensuring no U.S. users were active on the platform. These measures include banning users who could be identified as American by their U.S. mobile number.
In response to allegations, Binance stated: “This filing is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years. Nevertheless, we intend to continue to collaborate with regulators in the U.S. and around the world,” the firm said.
“The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime.”
A Look Back At The Platform’s Operations
Binance was founded in 2017 by Canadian billionaire Changpeng Zhao and, since this point, it has grown to become the biggest blockchain ecosystem and largest digital asset exchange in the world.
The platform is trusted and used by millions worldwide, so how have its past operations now caused suspicions to be raised with the CFTC?
Zhao has been fostering the growth of Binance in the U.S. since 2019. During this time, Binance has claimed that, whilst they have been active in the U.S., they have been ensuring there are no active U.S. traders by banning anyone with a U.S. mobile number.
However, in CFTC’s trial against the platform, it has come to light that Binance did not initially require identity verification prior to trading on the platform when it first became active in the states.
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Despite Binance announcing in 2021 that it was tightening rules on identity verification, the CFTC has argued that this initial failure to acquire proper verification of customers has led to Binance operating under an “intentionally opaque” structure within the country.
By operating in this manner, the CFTC has argued that Binance has been able to “maximise corporate profits” by avoiding compliance with proper U.S. financial and verification standards.
Rostin Behnam, chairman of the CFTC, stated: “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning that the CFTC will not tolerate wilful avoidance of U.S. law”
Behnam argues that the lawsuit against Binance is the only way to protect U.S. investors in the crypto sector.
Trouble For Binance And The Crypto Industry
Coming under fire from U.S. authorities has left a lot of uncertainty on the horizon for Binance and its operations within the states. However, unfortunately for the platform, this suspicion from the CFTC comes hand-in-hand with the greater problems currently facing the global crypto industry.
It’s no secret that the crypto industry has been suffering a lapse in the last year. Despite the sector having an initial boom in growth, the entire industry is now under fire for its safety and security measures and its prices have been in a steady decline since 2022.
The Bank for International Settlements (BIS) published a report in 2022 titled “Crypto Shocks and Retail Losses” which revealed that the crypto industry lost over $650 billion after the Terra-Luna ecosystem and the FTX crypto exchange collapse.
Both of these scandals saw billions of dollars vanish from the crypto market. In fact, in just one year, the market declined from its peak of $3 trillion to just $800 billion.
What with 2022 being such a roller coaster ride for cryptocurrency markets, it’s hardly surprising that last year also saw U.S. officials crack down on the safety of the crypto industry. Officials issued a warning that they planned to tighten laws against problems such as lack of transparency and conflicts of interest from crypto platforms.
Unfortunately for Binance, stricter U.S. policies and a general dip in the crypto market have led not only to this recent trial, but the entire future of it and the rest of the crypto industry looking rather murky.