The largest cryptocurrency trading platform in the world, Binance, is under investigation by US regulators, who claim it has been operating illegally in the nation.
The Commodities Futures Trading Commission (CFTC) sued the company, alleging that it developed American business while improperly registering with the authorities.
It claimed that Binance had broken numerous financial laws, including prohibitions on money laundering. Binance defended its business methods.
To ensure that US users were not active on the network, it claimed to have made “substantial efforts,” including barring users who were identified as US citizens or residents or who had US cell numbers.
The best course of action is to safeguard our users while working with regulators to create an effective regulatory framework.
With more than 100 million users worldwide since its founding in 2017, the company has grown to become the largest centralised market for digital assets in the world. It is led by “Chinese-born Canadian billionaire” Changpeng Zhao, who was also named in the dispute.
According to the CFTC, Binance has been operating in the US since 2019, but has failed to register with the authorities or follow applicable US regulations by employing an “intentionally opaque” global company structure. The CFTC claimed in the civil case it filed in federal court in Illinois that Binance, for a significant portion of that time, did not ask its users to furnish any identity verification information before trading on the site.
The company declared it was tightening its regulations in 2021. But at the same time, the CFTC said it counselled US-based customers on how to bypass those rules using virtual private networks (VPNs) and shell firms.
According to the CFTC, “the firm circumvented the laws to maximise corporate profits.”
The government brought the lawsuit to defend American investors, according to CFTC Chairman Rostin Behnam, and it should serve as a larger warning to individuals operating in the cryptocurrency industry.
The crypto business has been experiencing difficulties due to a steep decrease in pricing and more regulatory scrutiny after several years of rapid expansion.
US officials issued a warning to the sector last year, stating that they intended to use the law already in place to more strictly enforce against problems including conflicts of interest and a lack of transparency.
The CFTC stated in October that more than 20% of the actions it has pursued in the previous 12 months involved the industry, including proceedings against Bitfinex and Tether. It is also one of the US government authorities that has accused Sam Bankman-Fried and FTX, a company that was once Binance’s main rival, of fraud.