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News Article

Binance Yields to Regulators

By Cinthya Alaniz Salazar | Mon, 08/23/2021 - 15:33

After traders lost millions in a platform glitch, cryptocurrency platform Binance drew the scrutiny from regulatory and financial watchdogs. Now, after weeks of pressure, the company announced that it will implement stricter background checks in an effort to combat money laundering.

The world’s largest crypto exchange platform, domiciled in the Cayman Islands, had failed to heed warnings from financial watchdogs in Germany, Britain and Japan, which explicitly cited potential risks to consumers related to money laundering. In May 19, an application glitch wiped out an estimated US$100 million in consumer holdings, leading the company to seek improving its relationship with regulators.

"We aim to work more collaboratively with policy-makers to improve global standards and discourage bad actors," said Binance CEO Changpeng Zhaoin a statement.

Because cryptocurrencies are relatively new, regulation is weak at best if not completely absent and globally uneven. US Treasury Secretary Janet Yellen warned regulators as much in May, informing them that the regulatory framework in the US did not have the ability to address cryptocurrency.  Its closest neighbor Mexico, on the other hand, has prohibited the use of cryptocurrencies in its financial system completely. 

The platform will now require customers to provide a government-issued ID and pass facial verification to qualify for “intermediate” verification, which will allow them to access all platform features including crypto deposits, trades and withdrawals. Before now, customers had only been asked to provide ID when they wanted to raise their trading limit.

Although Binance said that it would be appointing a global money laundering reporting officer, former US Treasury criminal investigator, Greg Monham, said that some lawyers are still skeptical. According to Alireza Siadat, partner at Annerton law firm in Frankfurt, the financial watchdog would still need to know which local entities run Binance’s know-your-customer process in order complete necessary audits and check compliance with local laws.

From here Zhaoin needs to live up to his words and move to fill in the necessary regulatory gaps in order for authorities to weed out money laundering schemes and dissuade future ones.

The data used in this article was sourced from:  
Binance, US Treasury, Gobierno Mexicano, Annerton Law Firm
Photo by:   Executium
Cinthya Alaniz Salazar Cinthya Alaniz Salazar Journalist & Industry Analyst