Following the disclosure, there are questions concerning how compliant the exchange has been with regulations.
The Financial Times has reported the possible existence of a Binance-China link. FT cited it was in the possession of some internal documents belonging to Binance. FT noted that these documents contradict past claims by various Binance executives, including Changpeng Zhao.
In one such claim, CZ hit back at critics who accused Binance of being state-sponsored. CZ noted that Binance had pulled the plug on its operations in China since 2017. Zhao also noted that only a small number of Binance’s customer service agents remained in China till in 2018.
However, the internal documents quoted by Financial Times reveal that Binance continued to operate out of China until at least 2019.
What the Documents Revealed about the Binance-China Link
The internal documents also revealed that top executives at Binance instructed Binance employees to hide the company’s China presence. One message in 2017 advises its users not to publish any of its office addresses anywhere. Another document revealed that employees on payroll in China were asked to attend a tax session in an office located in China.
In their response, an unnamed Binance employee noted that the picture being painted was inaccurate. “Unfortunately, anonymous sources are citing ancient history (in crypto terms) and dramatically mischaracterizing events,” Binance said. CZ believes the suspicion is because he is Chinese and also employs Chinese.
Further, Binance reassured its customers that the Chinese government does not have access to its data except by making legitimate requests.
Is Binance Hiding Something?
The CFTC’s lawsuit follows the application of Binance.US to acquire assets of defunct Voyager Digital for a proposed $1bn purchase. The Committee on Foreign Investment in the US is reviewing the proposal to determine if the investments will compromise national security.
Following the disclosure, there are questions concerning how compliant the exchange has been with regulations. While the exchange was incorporated in 2017 in the Cayman Islands, it has no designated headquarters.
The Commodity Futures Trading Commission (CFTC) has filed a motion against Binance for failing to disclose its headquarters. The CFTC noted that Binance was staying in the ‘regulatory grey’ by not registering a location.
Again, the lawsuit accused Binance of serving American clients illegally. Further, the regulator alleged that Binance had suggested using VPNs for these customers to hide their locations. Following these announcements, a net outflow of $900 million has been moved out of the exchange as customers fear what may come next.
An experienced writer with practical experience in the fintech industry. When not writing, he spends his time reading, researching or teaching.
