On Tuesday, the U.S Commodity Futures Trading Commission (CFTC) announced that it filed a lawsuit against the largest crypto exchange, claiming that it did not take the necessary measures to verify the customer’s true identity and profited from this action.
A response was delivered in less than 24 hours. CZ made a brief statement on Binance’s official website to deny the latest charges. The CEO of Binance emphasized two points – first, Binance’s compliance with regulations, and second, the exchange’s trading rules.
Binance always acts in compliance with American and global regulations, according to the statement.
The firm previously established its own Compliance teams with extensive law backgrounds in an effort to cope with law enforcement requests. Binance reportedly seized accounts that failed to follow the ruling.
The seized amounts were estimated at $125 million in 2022 and $160 million in 2023.
Tough Times for Binance
Binance’s all-encompassing technology serves a vital role in ensuring full compliance. Accordingly, Binance.com is highly restricted to U.S. users.
Binance said it could achieve that using, “nationality (KYC), IP (including commonly used VPN endpoints outside of the US), mobile carrier, device fingerprints, bank deposit and withdrawals, blockchain deposits and withdrawals, credit card bin numbers, and more.”
The company asserted that it would continue to meet compliance obligations in the U.S. and other countries.
Since the CFTC alleged Binance of conducting insider trading under 300 accounts, this allegation caused some frustrations among crypto investors, especially Binance’s users.
Insider trading undermines the market’s integrity and can damage the reputation of the exchanges and individuals involved.
Regarding this matter, CZ stated that Binance.com does not participate in profit-driven trading or market manipulation.
The platform reportedly affiliated entities providing liquidity for fewer liquid pairs, but claims these affiliates are closely monitored. CZ also indicated the exchange’s 90-day no-day-trading rule, which prohibits employees from selling a coin “within 90 days of your most recent buy, or vice versa.”
A Downhill Slide
Since the end of last year, negative news about Binance has become uglier than just personal attacks. In December 2022, Reuters reported that the US watchdogs had investigated Binance since 2018 for suspected money laundering and sanctions violations.
The recent lawsuit filed by the U.S. Commodity Futures Trading Commission (CFTC) against Binance has caused shockwaves in the crypto community. In response to the lawsuit, Binance has expressed disappointment and surprise, claiming that the move was “unexpected.”
Binance faces the possibility of heavy fines, as the CFTC has asked the court to impose fines, demand the return of illicit profits, and permanently ban registration and trading.
Crypto Firms Face Uncertain Regulatory Landscape
The regulatory crackdown on the cryptocurrency industry shows no signs of slowing down. The latest move was spearheaded by the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC).
Speaking with CNBC’s Squawk Box on Tuesday, CFTC Chief Rostin Behnam insisted on the need for aggressive moves due to the ongoing fraud. It’s clear that the regulatory scrutiny on crypto has intensified sharply over a couple of months.
The crypto industry currently faces challenges regarding security and trust from investors. The high-profile hacks and a series of collapses have eroded confidence in the market, making it even more difficult for companies to gain a foothold in the industry.
While the U.S. watchdogs are making efforts to crack down on fraud and misconduct in the crypto industry, the lack of clear regulations and guidelines makes it difficult for companies to operate and thrive in the U.S.
The situation led companies to explore alternative markets and jurisdictions that offer more favorable regulations for cryptocurrency businesses. While the U.S. is a large market at the moment for crypto, that may change.