Binance now under scrutiny by U.S. regulators

The Chinese-born crypto-exchange Binance is in the United States since 2019. However, Binance Holdings Ltd., registered outside America, is a different entity from Binance U.S., specially designed for U.S. citizens (and with more restrictions). Now, is the first and original company that will be investigated by the Commodity Futures Trading Commission (CFTC).

According to a report released by Bloomberg, the U.S. regulators think that this platform could’ve allowed crypto-derivatives trading for their citizens. This, even when Binance U.S. doesn’t offer the service because is heavily regulated in the country. Binance Holdings isn’t registered at all with the CFTC, either.

In the United States, at least Bitcoin (BTC) and Ethereum (ETH) are considered commodities, and the CFTC is in charge of regulating their financial futures and other derivatives tools. Every company that aims to deal with these tools in the country and/or for their citizens must register with CFTC and approve their requirements to operate.

For now, as indicated by Bloomberg, the platform “hasn’t been accused of wrongdoing”. However, they’re barely starting to investigate the Binance activities. So, it’s still early to say if further enforcement actions will be taken.

To be fair, in the Binance official Terms is stipulated that the U.S. citizens aren’t allowed to use the original platform, only the local-focused one. That includes banning them from investments in derivatives through Binance. The founder of the company, Changpeng Zhao, commented a bit about it during a recent event.

“We’ll continue to improve our compliance (…) We’ll also work very actively with regulators around the world to improve the compliance standards of the industry.”

Additionally, one of his latest tweets almost accused the Bloomberg article of only be meant to spread FUD (Fear, Uncertainty, Doubt) in the crypto-community.

“Tai Chi” supposed plans and Binance Coin

By late October 2020, Forbes revealed a polemic document about Binance. According to them, the crypto-exchange would be aiming to evade U.S. regulators since 2018. They were planning a whole corporate strategy to establish a new entity in Delaware (the “Tai-chi” company) not as a “real” Binance subsidiary in the country, but only as a decoy to attract regulators.

As described by Forbes:

“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. All the while, potential customers would be taught how to evade geographic restrictions while technological workarounds were put in place”.

At the time, Changpeng Zhao declared that this supposed document wasn’t created by any current or former Binance employee. So, the information would be incorrect. However, U.S. regulators probably kept that in mind.

Meanwhile, Binance Coin (BNB), the native token of the exchange, suffered a small stumble with the news. During the last month, this cryptocurrency got a 163%+ increase and a market capitalization of over $40b. It also dethroned Tether (USDT), Ripple (XRP), and Cardano (ADA) in the third place.

Nevertheless, in the last 24h, BNB price has lost over 11% and is still bearish. We can’t really say if the Ripple story will be repeated with this other company. It seems like those involved will take their time to find out.

Featured Image by Anna Nekrashevich / Pexels

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Originally published at https://blog.alfa.cash on March 12, 2021.

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