Binance is the world’s largest cryptocurrency exchange, handling about $23 trillion in trades in 2022. However, the platform has been facing increasing regulatory pressure from various governments, including the US and the UK, over its compliance and security practices.
In March 2023, the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its founder Changpeng Zhao, accusing them of violating US laws by allowing Americans to trade crypto derivatives, which are banned for retail investors. The CFTC also alleged that Binance failed to register in the US and did not implement adequate measures to prevent money laundering and other illicit activities.
The lawsuit could result in hundreds of millions of dollars in fines and a possible ban on Binance’s ability to operate as a derivatives trader in the US, which accounts for 16 percent of its revenues. Binance CEO Zhao denied the allegations and called the lawsuit an “incomplete recitation of facts”. Following the news, investors withdrew $1.6 billion from the platform, though experts said that Binance’s reserves may be large enough to withstand such a hit.
Binance also faced a crackdown from the UK’s Financial Conduct Authority (FCA), which issued a warning in June 2021 that the firm cannot conduct any “regulated activity” in the UK. The FCA said that Binance Markets Limited (BML), an affiliate of Binance Group based in London, did not have the necessary authorization or registration to operate an exchange in the UK. The FCA also advised people to be wary of adverts promising high returns on cryptoasset investments.
Binance said that the FCA notice would have no “direct impact” on the services it provides from its website Binance.com, which is not UK-based. However, the FCA ordered BML to stop any form of advertising in the UK by June 30 and to provide records of all its UK customers by July 2.
The FCA’s move was part of a wider pushback from regulators around the world against cryptocurrency platforms, which are seen as risky and potentially used for illegal purposes. Binance, which is currently based in the Cayman Islands, has multiple entities around the world and has previously moved its headquarters from Malta.
Binance is one of the most popular and innovative crypto exchanges in the industry, offering a range of products and services, including digital wallets, futures, securities, savings accounts and even lending. However, its rapid growth and global reach have also attracted scrutiny and challenges from authorities who want to protect consumers and enforce laws.