Binance under penalty

No Dutch treat as Binance fined millions for defying regulators

Binance has been slapped with a seven-figure fine after Dutch central bankers lost patience with the controversial cryptocurrency exchange’s unwillingness to play by the rules. 

On Monday, De Nederlandsche Bank (DNB) announced that it had imposed a €3.325 million penalty on Binance for offering ‘crypto’ services in the Netherlands without registering with the DNB, as required under the country’s Money Laundering and Terrorist Financing (Prevention) Act, which is known locally as the ‘Wwft’. 

Under Dutch law, Binance was required to register with the DNB as of May 21, 2020 and the DNB publicly warned Binance in August 2021 that, by failing to register, it was “illegally offering services for the exchange between virtual and fiduciary currencies.” The DNB concluded its investigation into Binance last December and the fine was formally issued this April. 

The DNB noted that Binance’s failure to register necessitated a minimum penalty of €2 million but this had been increased “due to increased seriousness and culpability.” The size of the fine also reflects the DNB’s view that Binance enriched itself by not paying costs that it would have been subject to had it not so actively avoided regulatory supervision for so long. 

The DNB claims that Binance ‘objected’ to the fine due to the exchange having belatedly filed an application for registration with the DNB in September 2021. This application—and Binance being “relatively transparent” about its operations following the application filing—resulted in the DNB reducing Binance’s original €3.5 million fine by 5%. 

But the full document detailing the DNB’s dealings with Binance illustrates the central bank’s frustration with Binance’s modus operandi. Said M.O. consists of Binance continuing to operate in markets despite local authorities’ demands that they cease and desist, stalling for time by pinky-swearing that local licenses are all they want for Christmas, continuing to reap lucrative trading commissions in the interim, often not following through on these applications when it appears that the jig is up. 

At one point, Binance said it couldn’t stop offering services to Dutch customers because doing so might result in a ‘fire sale’ of the digital assets held on the exchange and some customers might sell at a loss. When this excuse didn’t fly, Binance promised to transfer its Dutch customers to a DNB-registered exchange before November 18, 2021. Unsurprisingly, the DNB notes this transfer “has not occurred to date.” 

In another Binance stalling tactic, the DNB said the exchange’s application for registration was “incomplete.” Binance then withdrew the application, waited a few more months and submitted a new application. Predictably, the DNB found this application also lacked certain details, and it was another month before Binance got around to submitting the requested information. 

Binance’s infamous aversion to ‘know your customer’ (KYC) and anti-money laundering (AML) requirements was on full display during a telephone call its execs had with the DNB. Binance reportedly told the DNB that it had no idea how many transactions involving Dutch customers might meet the criteria that warrant reporting to local AML watchdogs. As a result, the DNB says it has no confidence that Binance is currently meeting the requirements of the Wwft. 

Binance even had the cheek to accuse the DNB of violating standards of impartiality because Binance wasn’t aware of any other exchanges being targeted for serving the Dutch market without permission. The DNB noted that it was under no obligation to inform Binance of any open investigations into other private companies. 

A Binance spokesperson told CNBC that the financial penalty “marks a long-awaited pivot in our ongoing collaboration” with the DNB. The spox added that while Binance “deeply” respected the DNB’s right to enforce its rules, “we do not share the same view on every aspect of the decision.” Binance boss Changpeng ‘CZ’ Zhao was his usual sneering self, tweeting simply: “Onward.” 

CZ’s optimism aside, there’s no guarantee that the DNB will approve Binance’s application and the recent run of negative headlines involving the exchange probably won’t help tip the scales in Binance’s favor. In the past six weeks alone, it’s been reported that Binance is under investigation for potentially violating U.S. securities laws, may have violated economic sanctions against Iran and enabled the laundering of $2.35 billion in illicit funds. So yeah, onward, so long as the path ahead is the road to ruin. 

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to BinanceBitcoin.comBlockstreamShapeShiftCoinbaseRipple
EthereumFTX and Tether—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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