The Justice Department is investigating Binance Holdings, the world’s largest cryptocurrency exchange. Primarily, this is to determine whether it violated economic sanctions imposed on Russia. According to Bloomberg, the probe is examining whether the exchange or its employees breached the sanctions put in place due to Moscow’s military actions in Ukraine. Despite the allegations, Binance insists that it follows all US and international sanctions. On the other hand, the Russian authorities have made official statements on how they have planned to curb sanctions using cryptocurrencies.
Binance Exchange and Compliance with Sanctions
Binance claims that it has implemented an initiative to revamp its corporate governance structure and transform its global operations. The exchange also states that it has a know-your-customer (KYC) process that rivals that of traditional banking systems. Its KYC process includes a mandatory disclosure of residence and personal identification checks. The company takes a zero-tolerance approach to double registrations, anonymous identities, and obscure sources of funds.
“In 2021, Binance launched an initiative to completely overhaul its corporate governance structure, including bringing in a world-class bench of seasoned executives to fundamentally change how Binance operates globally.”
Back in 2021, Binance pledged to abide by EU’s ruling on Russian sanctions. Despite that, the Justice Department will not make baseless accusations on such critical matters. For the most part, it would be interesting to see what evidence the DOJ holds on Binance exchange.
Based on the report, the investigation is looking into whether the exchange or some of its employees helped Russia with supplying money for their operations in Ukraine. This is according to five anonymous sources.
Binance’s Struggles with Regulators
Binance has faced numerous allegations from US regulators and authorities in recent years. Although many of the claims were unsubstantiated, the exchange has been under scrutiny. Earlier this year, anti-crypto Senator Elizabeth Warren and other officials wrote an open letter to Binance asking for various information from the firm. They alleged that the exchange was facilitating illicit activity by intentionally concealing its activities.
Binance exchange responded to the claims made by the senators, stating that most of the information was taken from inaccurate media reports. The exchange denies allegations of violating sanctions against Russia and insists that it adheres to all US and international sanctions. Binance has taken steps to address compliance concerns by revamping its corporate governance structure and enhancing its KYC process.
Walking a Thin Line…
Being the world’s largest crypto exchange certainly has its own baggage. Back in 2021, Changpeng Zhao, the CEO of Binance exchange revealed one of the largest Ponzi schemes in the history of crypto. Essentially, Changpeng Zhao went to war with Sam Bankman-Fried and dumped all their FTX token holdings. Within a matter of days, the FTX collapsed and a vast majority of investors lost their assets overnight. Soon after the collapse, countless sources revealed how SBF had strong ties with the US democratic party.
Subsequently, Binance exchange has found itself in the middle of a political war. With that, it is only natural for the regulators to probe into their operations and look for something. Now, while Changpeng Zhao revealed a true scam operation, it doesn’t mean that Binance is without fault. Considering the scale of their operations, one can safely assume that they have certainly slipped more than a few times.
And in case of Russian sanctions and all the crimes against humanity charges on Russian authorities, even a small proof that they helped Russia with their sanctions can have devastating repercussions for Binance exchange. But that’s not all.
In case the investigation manages to convict Binance, we could expect even more restrictive crypto regulations. While Changpeng Zhao shrugs off the serious charges against them as simply “FUD”, Binance exchange is facing life or death situation as the lawsuits against them keep stacking up.