Binance promises ‘pivot’ as its forced march towards compliance continues

Binance continues its forced march toward regulatory compliance, although new withdrawal restrictions are sparking fears that the troubled cryptocurrency exchange is bracing for a run on its bank.

On Tuesday, Binance announced that its daily withdrawal limit for customers who have completed only ‘Basic Account Verification’ had been lowered from two BTC to just 0.06 BTC (roughly US$2,400 at time of writing).

All new users who fail to provide complete Know Your Customer (KYC) details are subject to the lower limit, while all existing ‘Basic’ accounts will be subject to the same limits effective August 23. However, new or old customers who submit to the full KYC process will be permitted to withdraw up to 100 BTC ($4 million) per day.

Binance CEO Changpeng ‘CZ’ Zhao tweeted that the enhanced KYC efforts were intended to “further our leadership in this area.” If we believed for a second that CZ was being sincere, our only response would be to quote Corrado ‘Junior’ Soprano: Some people are so far behind in the race that they actually believe they’re leading.

More cynical observers believe the new limits are simply the latest act in Binance’s ongoing compliance theater, and there’s already been speculation that Binance’s, er, less forthcoming customers will simply open additional Basic accounts to withdraw the same volume of funds through a slightly more complicated formula.

Even less charitable observers are suggesting the higher hurdles are intended to stem capital outflow from Binance—note that deposits aren’t facing any new limits—while the U.S. Department of Justice investigates several execs behind the sketchy Tether stablecoin for suspected bank fraud.

Even if the latter suspicion proves correct, any further degradation of the already shaky foundations underpinning Tether’s reserves could be blunted by more ‘unscheduled maintenance’ at Binance. You know, the same type of maintenance that occurs when banks cut their financial rails to Binance or a greater than usual number of customers try to access the funds in their Binance accounts.

A taxing situation

Binance also launched a new Tax Reporting Tool, which the exchange claims will allow customers to better track their digital currency trades “in order to ensure they are fulfilling the reporting requirements laid out by their regulatory bodies.”

This week’s tax and withdrawal changes follow recent announcements that Binance was pulling the plug on its ‘stock token’ products after regulators in Germany and Hong Kong put the company on notice. Over the weekend, Binance sharply reduced leverage on margin trades, a step CZ said the company took because it “didn’t want to make this a thingy” in the minds of increasingly unforgiving regulators. 

On Tuesday, CZ tweeted that “consumer protection is important to all of us. We want to create a sustainable ecosystem around blockchain technology.” Bitcz, please. To paraphrase a quote erroneously attributed to Winston Churchill, Binance can always be trusted to do the right thing, after exhausting all other possibilities.

Too little, too late?

Binance’s belated embrace of all things compliant comes after regulators in multiple jurisdictions issued warnings and/or outright threats regarding the company’s operations. CZ, whose previous approach to compliance can charitably be described as disdainful, appears to have finally clued in that his adolescent nose-thumbing was (surprise!) rubbing regulators the wrong way.

CZ has apparently lost interest in bragging to journalists about how he and his company were somehow immune to regulatory edicts due to Binance’s refusal to declare any single jurisdiction ‘home.’ On Tuesday, CZ pulled a 180, declaring that Binance will establish regional headquarters in a number of jurisdictions to assuage regulatory concerns.

But CZ just can’t help himself, as he undermined this overture by saying the company’s unorthodox corporate structure was “relatively hard to understand for regulators.” Trust us, CZ, they understand Binance all too well, which is why they’re lowering the boom.

CZ giveth, and CZ taketh away

Malta’s regulators were among the first to get a crash course in Binance’s unreliability. In 2018, Binance was only too happy to give off the impression that Malta was home base, in keeping with the local government’s desire to establish itself as ‘blockchain island.’ Binance even set up a Blockchain Charity Foundation in Malta to further ingratiate itself with the locals. 

But in 2020, the Malta Financial Services Authority grew weary of media references to the ‘Malta-based’ Binance, noting that the company had never followed through on its public declarations of obtaining a local digital currency exchange license. Now, Maltese media is reporting that Binance also never made good on over €7 million in financial commitments to the Malta Community Chest Fund, which was set up to benefit cancer patients. Stay classy, CZ.

The ghost of crypto future

Last Friday, CZ told an online conference that Binance was looking to hire a new CEO with a “very strong regulatory background.” On Tuesday, CZ told reporters that he was “very open” to finding a new chief exec “who may do a better job” at coloring within the lines. That said, CZ had no immediate candidates in mind, nor any timeline for the transition, making this proclamation so much vaporware.

Eager to maintain the façade, CZ suggested new leadership was necessary to assist Binance’s “pivot to be a fully regulated financial institution going forward.” Regardless of who’s at the helm, not since Ross Gellar attempted to move a couch up a flight of stairs has any pivot seemed less likely to succeed.

Let’s be clear: CZ’s 11th-hour conversion to regulatory straight shooter is straight out of the Ebenezer Scrooge playbook. Were it not for a late-night glimpse of a headstone bearing the all-too-imminent date of his demise (or, in this case, incarceration), CZ would still be swanning about the globe, proclaiming himself above the law and bringing the entire digital currency sector into disrepute. Bah, humbug.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups — from BitMEX to BinanceBitcoin.comBlockstreamShapeShiftCoinbaseRipple and 
Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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