CFTC investigating Binance
Cryptocurrencies,  Regulation

CFTC investigating Binance for American crypto customers: Report

The enforcement agency may be investigating whether the No. 1 cryptocurrency exchange still serves American clients, despite claims that it does not

Binance is reportedly under investigation for allowing Americans to buy and sell cryptocurrency derivatives on its platform, in violation of U.S. regulations and the world’s top exchange’s own policies.

On March 12, Bloomberg reported that the Commodity Futures Trading Commission is investigating whether Binance is violating regulations that prohibit the sale of commodity derivatives and other futures to U.S. investors by unregistered companies regardless of their location. 

The agency has said that the two largest cryptocurrencies, Bitcoin and Ether, are commodities rather than securities, and therefor fall under its jurisdiction. 

Binance began kicking U.S. customers off its platform in November—even though it had closed its platform to Americans on June 14, 2019—after setting up the independent exchange Binance.US in the country. At the time, Binance CEO Changpeng “CZ” Zhao said Binance.US would “bring the security, speed, and liquidity of to North America,” in full regulatory compliance with all U.S. laws.

The U.S. has become increasingly aggressive in enforcing these laws. Most notably, on Oct. 1 the U.S. Department of Justice indicted four founders and top executives of the Seychelles-based BitMex cryptocurrency derivatives exchange, including its well-known CEO, Arthur Hayes. 

Charged with criminal violations of the Bank Secrecy Act over what prosecutors called overly weak anti-money laundering (AML) controls, the CFTC sued BitMEX at the same time, saying it was “operating an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required anti-money laundering procedures.”

As for Binance, Zhao said on social media that the exchange follows U.S. regulations and has strong AML procedures in place, Bloomberg reported. 

Declining to comment on the existence of a CFTC investigation, Zhao said, “we’ll continue to improve our compliance,” adding that Binance works “very actively with regulators around the world to improve the compliance standards of the industry.”

In November, Binance sued Forbes and several journalists over an article that alleged it carried out an “elaborate scheme” to “intentionally deceive regulators and surreptitiously profit from crypto investors in the United States.”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.