Binance still can’t catch a break despite compliance ‘efforts’ theatrics

Troubled cryptocurrency exchange Binance is furiously promoting its compliance theater efforts but regulators across the globe continue to throw rotten fruit at the stage.

As of Thursday, U.K. bank Santander informed its 14 million customers that it was “stopping payments from Santander accounts to Binance wherever possible.” Withdrawals from the exchange are still permitted, but further deposits to Binance are off-limits “to help protect you from fraud.”

Santander’s move follows a similar step by U.K. banking giant Barclays earlier this week, which came in response to the consumer warning issued in late June by the U.K. Financial Conduct Authority (FCA) regarding Binance’s local offshoot lacking permission “to undertake any regulated activity in the U.K.”

Other U.K. financial institutions previously saw fit to curtail their customers’ access to Binance even before the FCA warning, while the exchange announced this week that it had been forced to suspend Euro deposits from the Single Euro Payments Area “due to events beyond our control.”

On Wednesday, Poland’s Financial Supervision Authority (KNF) added to Binance’s burgeoning global pariah status by recommending “special caution when using the services of Binance group entities” due to the “significant risk” of consumers losing their invested funds.

The KNF missive specifically cited warnings recently issued by regulators in other jurisdictions, including the U.K., Germany, Thailand, and the Cayman Islands, although the list of Binance’s ‘here be dragons’ jurisdictions also includes Japan, South Africa and the Canadian province of Ontario, while multiple regulatory authorities in the U.S. are reportedly investigating Binance for alleged money laundering and tax offenses.

Comply or die

Binance’s traditional response to regulatory smackdowns includes increasingly hollow claims of having made applications to operate legally within this or that jurisdiction, although none of these applications ever seems to result in Binance garnering approval to operate a lemonade stand, let alone safeguard significant volumes of customer funds.

On Tuesday, Binance’s CEO Changpeng ‘CZ’ Zhao posted his latest testimonial to the joys of compliance, in which he suggested that the crackdowns are “positive signs that an industry is maturing” and Binance “wants to be a positive contributor” to this maturation.

CZ took a page out of the Mark Zuckerberg playbook by claiming that Binance “haven’t always got everything exactly right, but we are learning and improving every day.” For years now, Zuck has been offering these types of ‘I know we can do better’ pseudo-apologies following each exposé of Facebook treating its user data as private property.

But after every public apology tour, Zuck sticks his hands right back into the user data cookie jar, exposing the theater behind these mea culpas. CZ is being equally disingenuous and performative here, and anyone who isn’t trying to get their holdings off Binance right this second probably deserves their ultimate fate.

CZ did his best to fight this narrative by touting the 500% expansion in Binance’s international compliance team and advisory board since 2020, as well as plans to “double our team size” by the end of 2021. You’ll notice there are no actual head counts provided here, so for all we know this fivefold increase could mean Binance now boasts a whopping five part-timers dedicated to compliance issues.

Binance did just announce a new director of compliance, former eToro man Jonathan Farnell, while Binance’s little-used American subsidiary Binance.US hired Manuel Alvarez, a former California state financial commissioner, to beef up its compliance capabilities. However, internal Binance documents predating the Binance.US launch spoke of the planned offshoot as a way to “insulate Binance from U.S. enforcement,” so one can really only be so impressed by this latter roster addition.

THE DIGITAL NOMAD FINDS A HOME?

CZ’s public letter also touted Binance’s cooperation with law enforcement agencies to “crack down on cybercrimes such as money laundering, terrorist financing and scams.” This newfound commitment to assisting law enforcement in curbing criminality represents quite the turnaround from just a couple years ago, when a Chainalysis report found that Binance was the single largest exchange recipient of illicit BTC, accounting for well over one-quarter of the total annual inflow.

Publicly, CZ may play dumb as to why his company has been the subject of such regulatory pushback but this is the same man who boasts about his company not having any physical headquarters, as well as his habit of keeping on the move, preferring to stay in an ever-changing series of AirBNBs across the globe rather than settle in any one location for too long.

CZ appears convinced that this pattern of behavior embodies a cool ‘digital nomad’ vibe, although the authorities may view someone who sleeps with his shoes on, his laptop under his pillow and his passport clutched in his teeth in decidedly less romantic terms.

However, Binance recently changed its terms of service for resolving customer disputes, stipulating that all such matters will be administered by the Hong Kong International Arbitration Centre. As recently as January, these matters were handled by the Rules of Arbitration of the International Chamber of Commerce (which calls Paris home).

Not for nothing, but this week CZ tweeted a picture of a meal he was consuming that sharp-eyed viewers tagged as coming from Hong Kong, a fact that CZ confirmed. Binance also registered a company (Binance Limited) in the territory on May 1, despite having dissolved a different company (Binance (Hong Kong) Limited) in September 2018.

Binance began life in China in 2017 but upped sticks shortly thereafter in response to Beijing’s plans to ban crypto trading. It’s more than a little odd that Binance would seek a return to HK given Beijing’s increasingly tight control over the special administrative region but perhaps CZ has compromising photos of Xi Jinping or something.

Actually, scratch that, as Thursday brought widespread reports of Beijing erecting new bricks of its ‘great firewall’ around several China-facing exchanges, including Binance and Huobi. These reports followed not long after the deputy governor of the People’s Bank of China issued a statement on the need to crack down on stablecoins (like Binance USD).

Fiat vendor: Not a car, but a dodge all the same

Meanwhile, Binance’s regulatory woes have left the company searching for new ‘fiat vendors’ to ensure the site’s liquidity rails are sufficiently greased. More commonly known as the Global P2P Merchants Program, it offers boundless opportunities for individuals who can provide “a more competitive fee structure or streamlined user experience” than currently on offer.

Binance has been running this program for well over a year now, but with the company losing fiat on-ramps faster than Rudy Giuliani loses state law licenses, the need for fiat vendors has never been more acute. Some of the usual Binance critics have had great fun suggesting alternative names for this program, including ‘money mule.’

The initial application form to become a fiat vendor includes such queries as the key countries/regions that one services, defining one’s fee structure and details (if any) of one’s Know Your Customer process. Presumably, if one passes to the second round of this review process, one is asked whether one possesses a suitcase with a false bottom and how many rolls of $100 bills can be stuffed up one’s back passage.

All in all, a pretty solid 72 hours or so for the Binance Group and CZ, who is seemingly bent on becoming the next Bond villain. We’ve started an office pool here at CoinGeek as to the title of this opus—Live and Let Bi? Dr. No Withdrawals? Frankly, my money’s on Cryptopussy.

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.

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