Certainly, the fact that Binance held a 92% share of the crypto market at the end of 2022 means it facilitates many transactions and offers a lot of liquidity to traders around the world, including in the US.Ī trader’s capacity to find competitive prices when buying and selling, as well as sources of liquidity (or other people to trade with) would be affected by the loss of or pull back of one of the world’s top ten crypto exchanges. Some experts have warned that “significant regulatory action could prompt Binance to increasingly shift its business operations beyond the United States”. So, Binance is up against two powerful US financial regulators.
Mark Van Scyoc/Shutterstock Crypto market changes The US Commodity Futures Trading Commission logo outside its headquarters in Washington DC. As well as focusing on the Initial Coin Offering market, it saw a 50% increase in enforcement actions against digital asset companies last year compared to 2021. This is a market the CFTC does regulate.Īnother US financial regulator, the Securities and Exchange Commission (SEC), has also been ramping up its crypto oversight activities. These latest charges against Binance focus on its activities in derivatives – financial contracts that are linked to the value of an asset such as oil or, in this case, cryptocurrencies. She said the action was based on defining stablecoins (a type of cryptocurrency) as a commodity, but: “we should seek to ensure the public understands that we do not regulate stablecoins and we do not have daily insight into the businesses of those who issue such”. She warned that these fines might “cause confusion about the CFTC’s role in this area”. Previous actions by this regulator in 2021 against Tether and Bitfinex resulted in major fines and a loss of credibility for the crypto industry.īut a statement published at the time by one of the CFTC’s five commissioners, Dawn Stump, pointed out that the CFTC doesn’t actually have responsibility for regulating cryptocurrencies. The CFTC aims to “protect the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets”. These outflows could continue if US regulators tighten their squeeze on crypto companies further, causing major players like Binance to shift focus to other jurisdictions. Investors withdrew a reported US$1.6 billion (£1.3 billion) from Binance within days of the CFTC’s announcement of its charges. So, this charge – against not only a crypto giant but also the company of an outspoken industry advocate – has created further upheaval in a market that has already suffered multiple crises in the last year. Binance saw its market share grow following FTX’s collapse.
Last year CZ’s tweets arguably contributed to the collapse of FTX, one of his company’s main rivals. Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint.
#BINANCE CRYPTO CURRENCY FULL#
Promising full responses in due time, he said: He even tweeted a link to his initial response to the recent CFTC charges, which he called “unexpected and disappointing”. CZ is an outspoken advocate for cryptocurrencies and regularly tweets about the industry and his company. People visit Binance nearly 15 million times a week to trade on the over 300 cryptocurrencies it offers in more than 1,600 different markets. The regulator has pointed to chat messages as evidence of CZ and Sim’s knowledge of various criminal groups using the exchange. They are charged with taking steps to violate US laws, including directing US-based “VIP customers” to open Binance accounts under the name of shell companies. The CFTC has also levied charges against Binance’s founder and CEO, Changpeng Zhao (known as CZ) and former chief compliance officer Samuel Lim. It says Binance has prioritised commercial success over regulatory compliance. The CFTC’s lawsuit alleges that Binance violated US derivatives laws by offering its derivative trading services to US customers without registering with the right market regulators.
This indicates how regulators – particularly those in the US – hope to clamp down on the cryptocurrency industry. But this particular case involves a regulator that does not directly oversee cryptocurrencies.
This is not the first time a cryptocurrency exchange has been charged by a regulator. The world’s largest cryptocurrency exchange, Binance, has been hit with a lawsuit by US regulator the Commodity Futures Trading Commission (CFTC).
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