Regulators Probed Binance for Illegal Activities

By Azuan Muda

Binance is not out of the wood yet. The exchange is being heavily scrutinized by regulators around the world for various in compliance activities, market manipulation and insider trading. 

Back in July, the Securities Commission Malaysia (SC) enforced Binance to close for illegally operating a Digital Asset Exchange (DAX). Under Sections 7(1) and 34(1) of the Capital Markets and Services Act 2007, all DAX operators must be registered as Recognized Market Operators (RMO) by the SC. In Australia, by December, the exchange will cease its futures, options and leveraged tokens services.

In the US, Binance is regulated under The Commodity Futures Trading Commission (CFTC), which regulates derivatives markets. CFTC comes into the picture in an effort to scrutinize reportedly that US residents are allowed to trade derivatives linked to digital tokens on the exchange. 

Evidently, the US Justice Department and Internal Revenue Service probed the exchange for potential use for money laundering. Until today, the agencies report no findings. 

Binance is not only exchange for cryptocurrencies trading, it also facilitates financial transactions using smart contracts such as Decentralised Finance (DeFi). Build on the foundation of Ethereum, DeFi allows financial products to be listed on a public and private network. As such, it is not regulated by a central bank despite offering financial services. 

In essence, regulators may find problems dealing with the exchange due to its structure and operative manners. As disruptive as it may sound, it is a defining occurrence for regulators to really set out clear frameworks regulating DAX comprehensively. It is a challenging move since it involves compliance and legal jurisdictions across the globe. Perhaps, they could learn from Gibraltar and the Isle of Man. 

Binance pledged to work closely with regulators to address these issues. The exchange has improved its compliance policies to prevent insider trading as well as planned to increase the size of its global compliance team by the end of 2021. 

Last month, Binance hired Greg Monahan, a U.S. Treasury criminal investigator, as a Global Money Laundering Reporting Officer. Also, recently, Binance further strengthen its audits team by hiring a former Europol Dark Web specialist, Nils Andersen-Röed.

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