cryptocurrency exchange Binance has once developed a plan to avoid the regulatory scrutiny and prosecution by the U.S. authorities. This was the time back in 2019 when crypto exchange Binance started its American entity Binance.US. Back then, the crypto exchange operated majorly from servers based in China and Japan.
However, 20% of its customers were in the United States where the authorities had singled an impending crackdown on the unregulated players in the crypto space. In a private chat seen by WSJ, a Binance executive warned colleagues that any lawsuits from US regulators would be like “nuclear fall out” for Binance’s business.
Fearing the threat of prosecution, Binance set out a plan of neutralising US authorities from 2018 to 2020, as per the texts and documents accessed by the Wall Street Journal. The strategy involved building a dedicated American platform Binance.US, which would license Binance’s technology and brand but otherwise would appear wholly independent of Binance.com. This would shield the global exchange from US regulator’s scrutiny while keeping the American users separate.
Binance developers in China maintained the software code that supported Binance.US users’ digital wallets, potentially giving Binance access to U.S. customer data, the WSJ reported.
Since 2020, the Department of Justice and Securities and Exchange Commission have been investigating Binance’s relationship to Binance.US, the report said, citing subpoenas and people familiar with the matter. If U.S. regulators determine that Binance has control over its U.S. entity, they could claim the power to police Binance’s entire business.
In an emailed statement to Reuters, a Binance spokesperson said, “we have already acknowledged that we did not have adequate compliance and controls in place during those early years…we are a very different company today when it comes to compliance.” Binance.US, the SEC and DOJ did not immediately respond to Reuters’ requests for comment.
Binance is under heightened scrutiny as three U.S. senators this week asked the giant cryptocurrency exchange and Binance.US for information about their regulatory compliance and finances. Reuters has reported that Binance.US was created as a de facto subsidiary in 2019 to draw the scrutiny of U.S. regulators away from Binance.com. (Reporting by Akriti Sharma in Bengaluru; Editing by Richard Chang and Diane Craft)
Binance, one of the world’s largest cryptocurrency exchanges, developed a plan to avoid the threat of prosecution by U.S. authorities as it started an American entity in 2019, the Wall Street Journal reported on Sunday.
Binance was considering to hire Gary Gensler before his appointment as the chief of the U.S. Securities and Exchange Commission (SEC). Back in 2018, Gary Gensler conducted meetings with former Binance venture arm head Ella Zhang, and Harry Zhou. Zhou wrote: “I observe that while Gensler declined advisor-ship, he was generous in sharing license strategies”.