Binance Regulatory Challenges in the US: What’s The Future Now?
Cryptocurrency exchange giant Binance has been hit with regulatory hurdles in the United States. The Securities and Exchange Commission (SEC) has taken legal action against Binance and its founder, Changpeng Zhao, accusing them of violating securities laws.
These violations include operating unregistered exchanges, broker-dealers, and clearing agencies, as well as misrepresenting trading controls and oversight on the Binance.US platform. The SEC’s actions have had a direct impact on Binance’s operations in the U.S., with Binance.US no longer offering trading in U.S. dollars on its platform. This regulatory scrutiny and the resulting penalties and legal consequences have significantly affected Binance’s presence in the United States.
Binance and its CEO, Changpeng Zhao, have faced serious legal repercussions due to a range of violations, including anti-money laundering (AML) and sanctions laws. The U.S. Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN) have imposed significant penalties and compliance undertakings on Binance.
Binance entangled in AML?
These violations include failure to comply with AML obligations, enabling illicit actors to transact on the platform. The DOJ and FinCEN have imposed a civil money penalty of $3.4 billion on Binance, along with a five-year monitorship and substantial compliance requirements.
Furthermore, Binance has been involved in sanctions violations, exporting goods and services from the United States to users located in sanctioned jurisdictions or blocked persons. This has resulted in 1,667,153 apparent violations of multiple sanctions programs. To resolve this issue, Binance has reached a $968,618,825 settlement with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and has agreed to retain an independent compliance monitor for five years.
In addition to AML and sanctions violations, Binance has also been found guilty of failing to register as a money transmitter and violating U.S. sanctions tied to the International Emergency Economic Powers Act. These violations highlight the exchange’s prioritization of growth over compliance with U.S. law, leading to illegal transactions between U.S. users and individuals in jurisdictions subject to U.S. sanctions.
Penalties and Compliance
The regulatory challenges faced by Binance have resulted in substantial penalties and compliance obligations. The exchange has reached resolutions with several U.S. regulatory bodies, including the DOJ, the Commodity Futures Trading Commission (CFTC), the Office of Foreign Assets Control, and FinCEN. The settlements involve a penalty of $968,618,825 and the appointment of an independent compliance monitor for five years.
Binance’s American arm, Binance.US, has experienced its own challenges due to regulatory pressure. Banking partners have severed ties with Binance.US, leading to the suspension of trading in U.S. dollars on the platform.
The SEC has also filed charges against Binance entities and Changpeng Zhao for various securities law violations, including operating unregistered exchanges, broker-dealers, and clearing agencies, as well as misrepresenting trading controls and oversight on the Binance.US platform. These regulatory actions have had a significant impact on Binance’s operations in the U.S.
Reports have indicated that Binance considered shutting down its U.S. arm earlier in the year to safeguard its global operations, underscoring the significant influence of regulatory scrutiny on the exchange. The settlement agreement between Binance and the U.S. Department of the Treasury’s Office of Foreign Assets Control involves the largest penalty in OFAC history. As part of the settlement, Binance has agreed to a “complete exit” from the U.S. and the appointment of a monitor to oversee its sanctions compliance program for five years.