The largest crypto exchange (both by market cap and trade volume) Binance Holdings Ltd. is allegedly being probed by the Commodity Futures Trading Commission (CTFC).
The investigation, which has been made public by anonymous insider agents, was necessitated as CFTC suspects Binance of violating its regulatory obligation of not allowing US-based persons to transact crypto derivatives using its exchange. However, CTFC argues that Binance, though not registered as a Futures Commission Merchant with the agency, is under its jurisdiction.
In a tweeted response, Binance CEO, Changpeng Zoa (CZ) tagged the “rumored” accusation as “FUD” (fear, uncertainty, and doubt) and dismissed it as a mere attempt to infuse negative narratives into what has been a dream year with an overall positive outlook for blockchain projects.
He tweeted: “It’s not a bull market without some FUD. Ignore FUD, keep building”.
Binance argues it is 100% compliant with regulations
Concerning the allegations, CZ hinted at Binance’s strict compliance with all regulatory demands. In his words:
“We (Binance) take a collaborative approach in working with regulators around the world and we take our compliance obligations very seriously.”
However, at the time of writing, CFTC is yet to release a comment on the issue. Nevertheless, it’s worth noting that the commission believes itself to have jurisdiction over digital assets such as Bitcoin and Ethereum and that in effect gives it a legal status that subjects all platforms dealing with those assets under its regulatory overview- whether US-based or not.
On its part, Binance, which currently operates from Singapore, is known for proactively restricting US residents from transacting on its platform, with prohibitory notices scattered across several interfaces of its online platforms. The company also uses advanced technologies for tracking illegal transactions to prevent money laundering or movements of illicitly sourced funds.
The growing trend of regulatory clampdowns in the US
However, this event only serves to validate existing fears that regulatory watchdogs in the US might start a serious crackdown against crypto-related businesses. For example, BitMex, based in Seychelles, is currently facing litigation charges filed by the agency. Since then, the exchange has lost a significant share of the crypto market.
The widely successful and soon-to-be listed Coinbase has also not been spared. The exchange disclosed in February that it has also come under the CFTC’s radar for several charges.
Elsewhere, the US Treasury Department revealed it is drawing up plans, which when enforced, would mandate banking institutions record details of persons involved in any form of crypto activity. Even though officials of the institution have clarified that the initiative is not meant to ban cryptocurrencies, crypto enthusiasts argue it would work against the ultimate objective of blockchain assets- decentralization.
Binance’s global presence
Even though Binance maintains an active presence in the US, CZ argues that since Binance’s user base consists of persons from different countries, it cannot be said the platform is subjected to a particular country’s law.
However, In 2019, Binance launched a US-based subsidiary (Binance US) as part of its expansion plan into the country. Speaking of the establishment, CZ said it is going to operate as a separate entity completely independent of the parent company.
The US arm is licensed under several states in the country and has completed registration with the Treasury’s Financial Crimes Enforcement Network.
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