Despite recent moves to bolster regulatory compliance, Binance very much remains in regulators’ crosshairs, with Malaysia becoming the latest country to ban it. Anticipating more regulatory trouble elsewhere, Binance has also closed its lucrative derivatives business in Germany, Italy and the Netherlands.
According to an announcement dated July 30, Malaysia’s securities regulator said it had issued a public reprimand to Binance for illegally operating a digital asset exchange in the country. The reprimand was issued against Cayman Islands-registered Binance Holdings Ltd., Binance CEO Changpeng Zhao and three other Binance entities — UK-registered Binance Digital Ltd., Lithuania-registered Binance UAB and Singapore-registered Binance Asia Services Pte. Ltd.
Binance has been ordered by Securities Commision Malaysia to disable the Binance.com website and mobile applications in Malaysia within 14 business days of July 26, cease all marketing activities, and restrict Malaysian investors from accessing Binance’s Telegram group, the regulator said.
A Binance spokesperson told Forkast.News that the company was aware of the notice and said that Binance.com did not operate out of Malaysia.
“Binance takes a collaborative approach in working with regulators in navigating this emerging industry, and we take our compliance obligations very seriously,” the spokesperson said. “We are actively keeping abreast of changing policies, rules and laws in this new space.”
Binance, which was founded in China before moving out of the country following China’s crackdown on domestic cryptocurrency trading, has been under increasing scrutiny from regulators around the world over its stock tokens, derivatives trading services and know-your-customer practices. The growing list of jurisdictions that have issued warnings to, or launched investigations of, Binance includes the Cayman Islands, Germany, Hong Kong, Italy, Japan, Lithuania, Malaysia, Poland, Thailand, the United Kingdom and the United States.
See related article: Crypto exchange Binance in regulators’ crosshairs as scrutiny mounts
Separately, Binance announced on July 30 that with immediate effect, its users in Germany, Italy and the Netherlands would no longer be able to open new futures or derivatives products accounts. Users will also have to close any open positions within 90 days, with effect from a date to be announced.
“As the crypto ecosystem evolves globally, we are continually evaluating our products and working with our partners to meet our users’ needs,” Binance wrote in a blog post announcing the change.
The exchange has been hit particularly hard in Europe. Aside from the cessation of derivatives trading in the three European markets, companies such as Barclays bank and payments provider Clear Junction have stopped processing transactions for it, and the exchange has suspended euro deposits via the EU’s single euro payments area bank transfers, cutting off ways to on-ramp fiat into the exchange, following a warning by the UK’s Financial Conduct Authority that Binance was not allowed to undertake regulated activities in the country.
Binance’s move comes as the company continues to limit its product range and step up compliance.
Last month, Binance announced that it was “winding down support for stock tokens on Binance.com to shift our commercial focus to other product offerings.” Binance’s stock tokens — which represented shares of public companies including Tesla, MicroStrategy, Apple and Microsoft — had drawn regulators’ ire from the UK to Germany to Hong Kong over whether they violated securities laws, specifically due to the way in which they were marketed.
The exchange last month cut high leverage, or the amount of debt crypto traders can take on the platform from 125x to 20x, and tightened its daily withdrawal limits by reducing the amount of Bitcoin that can be withdrawn from 2 Bitcoin to 0.06 Bitcoin (approximately US$2,000) for accounts that had completed only basic know-your-customer account verification. It also launched an application programming interface tool for new tax reporting.
See related article: Binance CEO reiterates willingness to replace self, beefs up KYC
Amid the regulatory onslaught, its CEO has announced that he is looking for someone with a strong compliance background to lead the organization as it pivots “from a technology startup into a financial services company,” and sets up corporate structures such as a headquarters.
The company is also substantially increasing the size of its compliance team and looking to hire former regulators to improve communications with authorities.
“This way they join our organization, they know what’s going on here, and they can use the same language to speak to their ex-colleagues,” Zhao told Mukaya Panich, chief venture and investment officer at SCB 10X, at SCB 10X’s recent Global DeFi Virtual Summit. “Then the communication will get better.”
A Binance spokesperson told Forkast.News: “Binance is ready to assist regulators from around the world and together find the optimal way to set a fair playing field. Consumer protection is important to all of us. We want to create a sustainable ecosystem around blockchain technology.”