US regulators want to ban Binance, the world’s biggest cryptocurrency trading platform, for operating illegally.
The CFTC sued the firm for doing business in the US without registering.
It accused Binance of violating numerous US financial laws, including anti-money laundering regulations.
Binance defended its business methods.
It stated that “significant investments” had been made to ensure that US users were not active on the platform. Including barring users who were identified as US citizens or residents or who had a US mobile number.
“This filing is unexpected and disappointing, as we have been collaborating with the CFTC for more than two years,” the company said, adding that it will continue to work with US and international regulators.
“Protecting our users and collaborating with regulators to develop a clear, well-considered regulatory regime is the best way forward.”
With over 100 million users, the 2017 startup is the world’s biggest digital asset exchange. It is led by a Canadian entrepreneur of Chinese descent Changpeng Zhao, who is also named in the complaint.
The Commodity Futures Trading Commission (CFTC) stated that Binance had been active in the United States since 2019. However, it avoided oversight by using a “intentionally opaque” global company structure.
During a significant portion of that time, Binance did not require its customers to provide any identity-verification information before trading on the platform, according to the CFTC’s civil lawsuit filed in Illinois federal court.
The company announced in 2021 that it was tightening its regulations. CFTC also advised US-based customers on how to circumvent these restrictions using virtual private networks (VPNs) and shell corporations.
The firm circumvented the regulations “to maximize corporate profits,” according to the CFTC.
It requested restitution, penalties, and permanent trading and registration bans from the U.S. court.
Rostin Behnam, chairman of the CFTC, stated that the government filed the case to safeguard American investors and that it should serve as a broader warning to those working in the cryptocurrency industry.
“Binance knew they were violating CFTC rules for years, actively working to keep money flowing and avoid compliance. So this should serve as a warning that the CFTC will not tolerate willful disregard for US law,” he stated.
Mr. Zhao posted a message on Twitter that read “4” around the time the lawsuit was announced, presumably referring followers to advise in an earlier post urging people to “ignore…. fake news, attacks, etc.”
After several years of explosive growth, the crypto industry has struggled with a precipitous price decline and increased regulatory scrutiny.
Officials in the United States forewarned the industry a year ago that they intended to enforce existing laws more strictly against issues such as conflicts of interest and lack of transparency.
In October, the CFTC reported that over twenty percent of the cases it had pursued in the preceding year involved the sector, including cases against Bitfinex and Tether. It is one of the US agencies charging Sam Bankman-Fried and FTX, Binance’s former main rival, with fraud.
