What is Binance and why is it under scrutiny by regulators?

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admin November 4, 2021
Updated 2021/11/05 at 6:11 AM

A cryptocurrency is a digital or virtual currency that is protected by encryption, making counterfeiting and double-spending almost impossible. Many cryptocurrencies are built on blockchain technology, which is a distributed ledger enforced by a network of computers. Binance, a prominent cryptocurrency exchange, has being targeted by financial regulators all around the world. Some have prohibited the site from engaging in specific operations, while others have informed users that it is operating without a licence.

About Binance

Binance is a cryptocurrency exchange that provides a variety of services to customers all over the world, including cryptocurrency spot and futures trading, as well as loans and non-fungible tokens. It also hosts a “decentralised” exchange that allows users to trade with one another directly. Binance Coin, the company’s own cryptocurrency, is the third-largest in the world, with a market capitalization of $68 billion. It is, by some accounts, the world’s largest platform. Its July 2021 trading volumes were $455 million, down about a third from the previous month. Binance also dominates crypto futures trading, with $1.4 trillion in volume in July, accounting for 55% of the whole market. Changpeng Zhao, also known as “CZ,” is the founder and CEO of Binance. Binance has amassed a sizable global following, with channels on the Telegram social media platform serving consumers from more than 30 countries. The corporate structure of Binance remains a mystery. According to British court records and Malaysia’s securities commission, its holding company is registered in the Cayman Islands. Binance is “decentralised,” according to a spokesman, and “works with a number of regulated organisations throughout the world.”

Is it being scrutinised by regulators?

Binance was found to be in violation of anti-money laundering and anti-terrorist funding regulations by the Dutch central bank. In recent weeks, a number of additional agencies, including those in Japan, the United Kingdom, Germany, Italy, Hong Kong, and Malaysia, have issued warnings against Binance. The US Justice Department and the Internal Revenue Service are allegedly looking into Binance. The platform has said that it takes its compliance responsibilities seriously and is dedicated to adhering to all regulatory standards wherever it operates.

Is there any impact from the scrutiny?

Because Binance does not provide financial information, it is difficult to assess whether the company has suffered a setback. Despite the regulatory pressure, the exchange has taken a number of significant actions. The CEO of Binance stated that he wants to strengthen his relationship with regulators. Their consent would be sought, and regional headquarters would be established. Binance has also reduced the number of crypto goods that are subject to regulatory oversight. It announced in July 2021 that it will cease its European futures and derivatives business, with users in Germany, Italy, and the Netherlands among the first to be affected. It has also prohibited Hong Kong customers from trading derivatives, citing the decision as being “in accordance with our commitment to compliance.” Binance likewise ceased trading digital tokens tied to stocks in July 2021 after authorities slammed its “stock token.” It also announced that it will no longer allow crypto margin trading in the Australian dollar, euro, or pound sterling. A former US Treasury criminal investigator was recently hired as the firm’s worldwide money laundering reporting officer.

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