With Regards To The Regulatory Structure Of Binance, New Allegations Have Surfaced

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Last Updated on October 18, 2022 by Bitfinsider

A report published by Reuters on October 17 suggested that cryptocurrency exchange Binance “evaded inspection” from United Kingdom and United States regulators. The charges mostly stem from two alleged incidences that occurred during the company’s working history.

First, Reuters reported on Binance strategy executive Zoe Wei’s plan to backdate a service agreement between Binance’s U.K. subsidiary and Binance’s Cayman Islands holding company to March 11, 2020. The move reportedly exempted Binance from registering with the United Kingdom’s Financial Conduct Authority for one year, as any company functioning before January 10, 2020 was able to do so before new restrictions took effect.

Second, Reuters claimed that a Binance-affiliated entrepreneur, Harry Zhou, submitted a proposal in November 2018 that would purportedly divert enforcement attention away from Binance and toward a U.S. corporation. According to Reuters, the proposal arose because “despite the prohibition on U.S. users [because to financial crime regulations], Binance was aware that U.S. traders continued to using the primary platform.”

The CEO of Binance, Changpeng “CZ” Zhao, responded to the Reuters report hours later. CZ expressly addressed the claims involving its U.S. business in the article: “This is the tale of the so-called ‘Tai-Chi [defensive action] PowerPoint,’ which was submitted by an external consultant as a suggestion on how to set up a business in the US. Let me state clearly once again for the record: it was never implemented. I personally rejected it.”

Regarding its regulatory environment, CZ explained that Binance’s market capitalization has “multiplied exponentially” in a short time and that “there isn’t a manual that explains how to immediately pivot from a small startup to a Fortune 100 organization.” He added, “But we’re learning fast,” noting that Binance was the first large exchange outside the United States to implement KYC for users. However, the crypto executive declined to comment on Reuters’ allegations regarding its behavior in the United Kingdom.

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