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The Front Page of Global Fintech

The largest fintech community in the world. Subscribe to our newsletter to stay up to date on the latest in news opinions, and all things financial technology.

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Signals: Binance's $4.3B settlement

Binance's settle highlights the need for better regulation, and the role that decentralization plays in a compliant crypto schema.

Signals: Binance's $4.3B settlement

Hey fintech friends,

The debate about how to regulate crypto rages on in courts across the US. As of this June, Coinbase has been fighting SEC allegations that it operates an unregistered securities exchange, Grayscale's successful petition for a GBTC review has sparked speculation that spot Bitcoin ETFs will soon be approved for trading, Circle's planned IPO is drawing close attention from observers after the SEC reportedly blocked its proposed SPAC last year…

... and then there’s the Binance settlement. On Tuesday it was announced that Binance, the world's largest cryptocurrency exchange, is pleading guilty to violations of Anti-Money Laundering, money transmitter, and sanctions regulations in a $4.3 billion deal with the Department of Justice that constitutes one of the biggest corporate settlements in US history. Separately, Binance is disputing a suit brought by the SEC alleging that it operates as an unlicensed trading platform, and that Binance commingled customers' funds with those of its own trading entity– allegations similar to those made against Kraken in an SEC suit filed Monday.

Much like FTX and Three Arrows, Binance's settlement isn't so much an indictment of crypto as it is another case of one company’s good old-fashioned misconduct. Financial regulations are imperfect– especially in their application to crypto companies– but this week was another refresher on why these rules exist in the first place. It also highlights the need for regulators to (reasonably) define how crypto fits into existing regulatory frameworks, and underscores how crypto exchanges’ moves towards decentralization can drive greater transparency across the industry (with caveats, but we’ll get to these).

Source: DeFiLlama

Crypto is a resilient industry that’s no stranger to events like this week’s. Let's dive into the Binance settlement and what it means for crypto governance going forward.

Tl;dr: Binance settlement

The DOJ's settlement announcement outlines Binance's track record of illegally serving customers in the US as it generated $1.35 billion in trading fees from US-based customers. Specifically, violations include:

  • Money transmitter licensing- At the point where it began onboarding US customers, Binance failed to register as a money services business. It also never filed a single suspicious activity report (SAR) with FinCEN.
  • KYC- Binance allowed US customers to trade without undergoing KYC through May 2022. Even once it began migrating US users to its Binance US affiliate, Binance executives contacted "VIP" US customers to migrate them back to Binance's main platform by helping VIPs re-register through offshore entities.
  • Anti-Money Laundering- Binance failed to monitor transactions for AML, and even intentionally facilitated trades between US customers and counterparties in sanctioned regimes, amounting to some $898 million in trades between US- and Iran- based users.