Changpeng Zhao’s firm, Binance, is ubiquitous but is located in no specific location.
In the first few months of 2018, the cryptocurrency exchange has moved over $3 trillion USD in transactions, mostly because of its global network of interconnected affiliates. And yet, it doesn’t have a physical headquarters.
Accelerated by incorporation in the Cayman Islands, the firm has developed into a prominent industry leader. New financial institutions that function in several jurisdictions but are anchored in none are the source of considerable scrutiny for global watchdogs.
Since its inception by CZ (who goes by the nickname “Sea-Zee”) in China four years ago, Binance has had a peripatetic life. Due to a broad-based crypto crackdown carried out by Chinese authorities in 2017, the firm reorganised its activities.
Following it’s arrival in Japan, officials issued a warning in 2018 stating that it was engaged in unauthorised trading in cryptocurrencies.
In early 2018, during Malta’s prime minister Joseph Muscat’s administration, Binance was welcomed with open arms. In the summer of 2020, however, the country’s financial regulator said that despite the company’s EU activities, it did not regulate the exchange.
According to Zhao, whose net worth was estimated by Forbes to be $1.9 billion in March of 2017, the firm has no corporate offices. In order to run a business, you need to have an entity, a headquarter, and a bank account. In the 2020 crypto conference, he said: “All of those things don’t have to exist for blockchain firms.”
Regulators on three continents are on their way to shutting down one of the world’s largest cryptocurrency exchanges, one of the world’s primary exchange platforms for the distribution of virtual currency, as they work to crack down on the unclear border between the completely open crypto sector and the more regulated financial market.
Binance Markets Limited, an established regulated affiliate of Binance, was recently barred by the UK’s Financial Conduct Authority from delivering traditional financial services, such structuring investment agreements in the UK.
Also, the organisation stated that the group was not permitted to offer cryptocurrency-related services within Britain’s borders, and advised investors to beware of unregistered firms as the majority of transactions are not protected by investor protection programmes.
The UK regulator recently followed Japan’s warning, which matched the issue that was originally brought to light in 2018.
Following the wider crackdown on securities by the company’s Securities Commission, the business is withdrawing from the province of Ontario. Binance has also been reported to be under investigation by the Cayman Islands Monetary Authority because of concerns that some of its activities might be headquartered in the Cayman Islands.
Earlier this week, Thailand officially complained to the police about the company’s apparent lack of a licence.
Binance’s organisational hierarchy looks more like a hydra than a pyramid, with semi-autonomous divisions functioning throughout the world.
The Zhao-owned companies in London and Vilnius that are not regulated as financial organisations work with UK-based payment processors like Clear Junction and Checkout.com to provide off-exchange currency supply to the Binance exchange.
The popular cryptocurrency exchange Binance says it is recruiting a larger number of compliance employees and deploying sophisticated techniques to thwart unlawful activities on its system.
It stated: “We treat our legal duties seriously, and have made significant investments in a comprehensive compliance programme.”
Meanwhile, as financial supervisors worldwide worry that money obtained from illegal drugs, ransomware, and other crimes is trickling back into the legitimate banking system through “unmonitored links with cryptocurrency,” regulatory authorities have begun attacking the company and some of its affiliates.
Tom Keatinge, a financial crime specialist at the Royal United Services Institute, has said, “Crypto exchanges are the border between the dark web and the regulated fiat world.” “The FCA deserves credit for shutting down Binance and putting the fear of God into other cryptocurrency exchanges.”
The following email was sent to users:
GBP Bank Withdrawal Temporary Suspension
Fellow Binancians,
Please note that GBP Bank Withdrawals (via Faster Payments) have been temporarily suspended. We are working to resume this service as soon as we can. In the meantime, users are still able to buy cryptocurrencies with GBP via Credit/Debit Cards on Binance.
For more information:
We apologise for any inconvenience caused and thank you for your patience
Why is the United Kingdom cracking down on Binance?
Binance is one of the world’s major cryptocurrency exchanges.
However, it has recently come under fire from regulators in a number of nations for pushing the envelope of the Bitcoin services it offers.
Japanese regulators warned this month that the firm is not authorised to operate in the country. Additionally, Binance has withdrawn from Ontario, Canada, in response to regulatory moves against other exchanges.
Binance established a company in the United Kingdom as part of its efforts to obtain registration as a cryptocurrency exchange in the nation. The concept was to build something akin to Binance. US, a country-specific website that adheres to local laws. It withdrew its application, though, early this year.
The FCA has repeatedly warned investors that they risk “losing all their money” if they invest in cryptocurrencies. It is concerned about the extreme volatility of the cryptocurrency market and feels that crypto exchanges are not open about the risks.
Recently released stock tokens on Binance.
Binance launched a new product called stock tokens in April. Stock tokens are cryptocurrencies tied to the value of certain equities, such as Apple or Microsoft. This blurs the distinction between bitcoin tokens and corporate shares, raising regulatory concerns in a number of nations.
Cryptocurrency companies in the United Kingdom have until next month to register with the FCA and comply with anti-money laundering regulations. Due to the huge volume of submissions, the initial January deadline had to be extended.
At the start of this year, the FCA prohibited bitcoin futures trading (which Binance offers). It is worried that cryptocurrencies are extremely volatile and that derivatives trading (which enables investors to borrow money in order to leverage their investments) is too hazardous for ordinary investors.