Binance attacked from all sides? – No time to breathe Changpeng Zhao (CZ)boss of the world’s leading crypto exchange of which we realized the Crypto Portrait, Last year. Caught in a vice between the two US regulators, the SEC (Securities Exchange Commission) and the CFTC (Commodity Futures Trading Commission), it could be that Binance ends up not knowing where to turn. Detailed analysis of the case!
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Binance caught in the vice of regulation
The king of cryptos attacked from all sides by the US regulator
By deep conviction or simple pecuniary motivation, one thing is certain. Since the start of the year, the american regulator is having a field day. It looks like he only has one now. objective on your mind : strafe the crypto sector backed up by regulatory sanctions.
The SEC began hostilities last February, by attacking the BUSD, a stablecoin issued by Paxos as part of a partnership with Binance. In fact, the outright banning of his broadcast condemned the disappearance said stablecoin. Sole cause of the dispute or not, Binance has since distanced itself from Paxos. And the latter is now ready to engage in a vigorous fight against the SEC in order to assert its rights.
Regulation, when the CFTC gets involved…
As if that weren’t enough, now the CFTC is putting its two cents in the story, and not just a little. It all started this beginning of the week after the CFTC engaged legal action against Binance and its CEO, CZ, according to a Bloomberg report. This lawsuit is the outcome of a investigation started in 2021 by the regulator. The alleged facts are multiple:
- Binance wouldn’t have not properly recorded with the CFTC before offering the purchase of cryptos to American citizens, in particular Bitcoin (BTC), Ether (ETH) and Litecoin (LTC), since 2019;
- Binance would also concealed the exact location of its head office(s) in order to protect themselves from US law for as long as possible, despite the launch of Binance US in 2019;
- Binance would also violated regulatory requirements of Commodities Exchange Act (CEA) and would not have not implemented control requirements AML (Anti Money Laundering) and of KYC (Know Your Customer) required ;
- The exchange would also traded on its own platform with nearly 300 addresses detained directly or indirectly couple CZ.
In all, these are not less than seven counts which therefore fell this beginning of the week on CZ and its exchange.
… Binance hits back
CZ’s reply was not long in coming. The boss of Binance completely denied the charges. It must be said that for the past two years, Binance has been stepping up its efforts to collaborate with the authorities, including the CFTC. CZ therefore sees this new attack as a knife stuck in the back. Changpeng Zhao explains that more than 750 people at Binance work every day at the compliance with the regulations of the various countries within which the platform offers its services. Moreover, Binance does not hesitate to accede to each of the requests of the American justice. This one was able in this way recover $285 million of funds related to illicit activities.
CZ insists that in no way does his company manipulate the market. Movements in cryptos are indeed taking place. However, it would only be simple conversions of cryptos into fiat currencies (euro, dollar, …) in order to cover the daily operating costs of the platform; cryptos being the main source of income. In short, according to him, Binance would be white as snow in this story.
The blur on the beginnings of Binance…
It is true that the development of the dazzling and global Binance exchange, was made at the time by taking advantage of thelack of regulation. This allowed it to take a considerable lead over its competition. A competition then binding itself more closely to the rules of conformity. A winning strategy, given the dominant position the exchange holds today. Except that the backlash of regulation is now very present.
However, Binance should now have broad enough shoulders to take the hit. But this is not necessarily the case for our small European and French startups towards which the MiCA regulatory wave (Market in Crypto Assets) fast approaching. However, that is another topic.
… echoing that which reigns on the side of US regulators
The problem is that we always come back to the same problem of legal vagueness to USA. The CFTC can only sanction Binance if the cryptos are indeed categorized as raw materials. Just as the SEC only has control over assets classified as actions. However, for the moment, cryptos are not neither one nor the other. It cannot therefore meet the requirements of both regulations at the same time.
So, cryptos, what sauce is it eaten? Stocks or Commodities? Because the least we can say is thatto USA, it is neither the SEC nor the CFTC that reigns supreme over cryptos, but rather misunderstanding and vagueness. A legal vagueness which is driving crypto businesses astray as they attempt to comply with regulations. On the one hand, Binance is being attacked by the SEC, which qualifies crypto as securities (shares). On the other hand, the CFTC is doubling down, maintaining stubbornly that those are commodities (raw materials). And the two regulatory bodies are struggling to find out which of them is right. Difficult to see clearly in such a situation.
Binance is not welcome in the US
Binance US didn’t travel far
You thought that was all? Oh no! The troubles are mounting for Binance, as the US regulator is far from done. Last February, the acquisition for 1 billion dollars of Voyager by Binance US has been blocked by the SEC. The latter had put forward the lack of registration of the exchange and the ongoing legal investigations concerning each of the two entities concerned as the cause. At the end of March, the SEC’s categorical no is now approved by the US Department of Justice (DoJ). The takeover is therefore postponed to the Greek calendars. And the feeling of the American regulator vis-à-vis Binance could not be clearer: he is wary of it like the plague.
Is this reluctance only due to Binance’s lack of registration with the SEC in its early days? A registration for cryptos which, as clarified a little earlier, are however not yet legally considered as shares and wander in a regulatory artistic vagueness. Or is the evil deeper? Does the US regulator suspect Binance of colluding with America’s number one enemy, China?
Binance 007, the Chinese spy?
Nowadays, the world tends to be divided into two: a western bloc (the USA and Europe) and an eastern bloc (the BRICS). In this new Cold War, nations will probably be forced, one day or another, to choose a side. countries as well as societies. Except that in the case of Binance, it would seem that the company is an in-between position that does not suit anyone. Which side will she choose? The profit side, in all likelihood. But is there more to dig than what the company wants to show us on the front?
Although the bitcoin mining and crypto trading are prohibited in Chinethe Chinese population remains interested by the domain, and links persist. Binance employees are even accused of helping some of them to register on the platform using fake KYC. But that’s not all. According to the Financial Times, Binance would continue to maintain ties with China, a country that the exchange nevertheless left in 2017. However, if there is one opponent of which the USA is wary, it is the Chinese government. The idea that he could, through Binance, acquire crucial information on the USA repels them to the highest degree.
And this is perhaps one of the motivations that led regulators to put a big stop to the acquisition of Voyager by Binance US. This same reason why the SEC and the CFTC are pouring out their endless stream of sanctions against the exchange.
It’s a road strewn with pitfalls who stand in front of theadoption crypto, in the United States as well as in Europe and France. An increasingly complex situation at a time when influencers et crypto media are beaten by regulation that is as excessive as it is unfair. Binance is clearly paying the price, caught between a rock and a hard place: the SEC and the CFTC. Let’s hope Binance doesn’t turn out to be a giant with a foot of clay and its Achilles heel isn’t just this powerful and oppressive regulation.
Binance has now reached a sufficient critical size to be able to return blow after blow in this kind of skirmish over bitcoin conquest funds internationally. To register on the exchange and form your own opinion, it’s this way. You will save 10% on your trading fees by following this link (trading link).
