Binance Investigated by CFTC in US

Major crypto exchange Binance is being investigated by the US Commodity Futures Trading Commission (CFTC) over concerns that it allowed Americans to place wagers that violated US rules, Bloomberg reported, citing undisclosed people familiar with the matter. (Upated at 14:28 UTC: updates throughout the entire text.)

The CFTC is seeking to determine whether Binance, which isn’t registered with the agency, permitted US residents to buy and sell derivatives that the regulator polices, the report said, adding that the platform hasn’t been accused of wrongdoing.

Following the news, Binance coin (BNB), ranked 3rd by market capitalization, dropped by around 7%, to USD 257, before recovering to USD 263 (14:25 UTC). The price is down by 15% in a day, trimming its weekly gains to 14%. Bitcoin (BTC) also corrected from around USD 56,500 to USD 55,353. It trades now at USD 55,931 and is down by 1.6% in a day.

The CFTC told Cryptonews.com they do not “confirm or deny, nor comment on, inquiries regarding investigative matters.”

Binance declined to comment, per the report. However, Binance added that they “take a collaborative approach in working with regulators” and they take their “compliance obligations very seriously”. In the US, per the exchange, they block US residents from its website and analyze deposits and withdrawals for signs of illicit transactions.

In November 2020, Changpeng Zhao, CEO of Binance, said that the company is “continually” trying to improve ways they’re blocking users in the US from accessing Binance.com, as users “do find intelligent ways to get around our block sometimes and we just have to be smarter about the way we block.” (Learn more: Binance.com Closing Another Door On Americans, Responsible For 7% Of Its Traffic)

The CFTC considers cryptoassets to be commodities and claims jurisdiction over their futures and other derivatives.

The commision already charged founders of another crypto giant, BitMEX, with operating an unregistered trading platform and violating multiple regulations. First reports about the ongoing investigation appeared in July 2019, while the official charges were announced in October 2020.

As reported yesterday, Binance has named Max Baucus as a policy and government-relations adviser. Baucus, a 79-year-old Democrat who served as Senator from Montana for more than three decades including a seven-year stint as Chairman of the Senate Finance Committee, and later as US ambassador to China from 2014-2017, will provide guidance and policy advice covering some of the world’s most important financial jurisdictions and agencies.

Binance & the USA

In June 2019, Binance confirmed that it would enter the US market and launch Binance.US, which happened in September 2019. It stated that, starting September 12, their clients from the US would no longer be able to trade on Binance.com.

In September that year, Binance US confirmed that BNB has been added to the Phase 1 digital asset offerings. Some experts agreed that BNB would pass the Howey test, and that the token is likely to become problematic for Binance as it established itself in America.

“Although the new US exchange will be a subsidiary company, the US Securities and Exchange Commission is unlikely to be impressed by the business model of Binance. The BNB token is both a security and a utility token and as such passes the Howey test for being a security irrespective of its utility properties,” cryptocurrency analyst Gary McFarlane told Cryptonews.com at the time.

Then, it was reported in March 2020 that Binance allegedly still allowed some users from the US to trade on the Binance.com platform, instead of Binance.US.

Allegedly, US users who have verified the account before September 12, 2019 could still continue to use their accounts as usual on Binance.com. “Basically some of us are grand-fathered in so to speak, for now at least,” wrote a user. Others said that they were using a virtual private network (VPN) to access the exchange.

Meanwhile, Binance amended its Terms of Use in August 2019, deleting the line that explicitly said that “Binance is unable to provide services to any U.S. person,” and changed it to “By registering to use a Binance Account […], you represent and warrant that […] you are not a U.S person.”

Revised January 12, 2021, it now says: “By registering to use a Binance Account, you represent and warrant that […] you are a non-U.S User, unless you only log on to websites for U.S. Users and use Binance Services for U.S. Users. […] You represent and warrant that you are neither from the U.S. nor on any list of trade embargoes or economic sanctions”.

In November 2020, Binance allegedly started blocking the United States-based clients from accessing Binance.com, giving them a 90-day deadline to withdraw all their funds. The exchange would reportedly no longer depend on users clicking to confirm that they are not from the US when making an account, but would block all US residents based on their IP addresses.

A person wishing to remain anonymous contacted Cryptonews.com at the time, claiming that he’s a US citizen, that he has been a Binance.com user since July 2020 when he had discovered that he was able to create an account there without being prompted to the US site, and that he was still able to log in in November. But he added that he wasn’t able to create a new account that month but was instead directed to Binance.US.

__

Reactions:

i wonder if makerdao/synthetix/dxdy/etc let US citizens to partipate in derivative trading

probably not, right

— Udi Wertheimer (@udiWertheimer) March 12, 2021

___
Learn more:
– Crypto Exchanges to Spend 2021 Focusing on DeFi, UX, and New Services
– Binance Shoots Itself In The Foot Amid Regulatory Scrutiny On Exchanges
– Can’t Beat Crypto Regulators? Educate Them
– Regulators Ponder Strategy As Bitcoin & Co Are Too Large to Ignore
– Tether & Bitfinex Settle NY AG’s Probe, Expect More Transparency