Fintech

Here's everything going wrong at Binance, the world's biggest crypto exchange

Binance trades far more crypto than rivals like Coinbase and FTX. Its regulatory challenges and legal issues in the U.S., EU and China loom just as large.

Binance CEO Changpeng Zhao

Binance CEO Changpeng Zhao is overseeing a global crypto empire with global problems.

Photo: Akio Kon/Bloomberg via Getty Images

Binance, the largest global crypto exchange, has been hit by a raft of regulatory challenges worldwide that only seem to increase.

It's the biggest example of what worries regulators in crypto: unfettered investor access to a range of digital tokens finance officials have never heard of, without the traditional investor protections of regulated markets.

Binance is the largest global exchange, doing $27 billion in spot exchange volume over 24 hours as of Tuesday, on a down day in the market, making it much larger than rivals such as Coinbase.

Binance has grown due to its focus on being the place for crypto enthusiasts to trade almost any digital asset, investors say. While many exchanges operating in the U.S. such as Coinbase take time and have a process for adding coins for trading, Binance has aggressively added new cryptocurrencies and more recently NFTs. That long tail is appealing to investors looking to speculate on the hot new crypto thing.

Originally founded in China, Binance reportedly pulled its employees and any official presence out of the Chinese market in 2017 after China banned ICOs.

But Binance has launched quickly around the world in many countries. Regulators in many of those countries have said Binance is operating without permission.

Where it's under fire

The U.S.

  • Regulators at the Commodity Futures Trading Commission are looking at whether Binance engaged in insider trading or market manipulation by "trading on customer orders before executing them", according to Bloomberg. Binance denied any misconduct.
  • The Justice Department and the IRS are also reportedly examining Binance's role in money laundering and tax evasion.

The U.K.

  • The Financial Conduct Authority said Binance's U.K. affiliate was operating without approval.

Japan

  • Japan's financial agency warned the company for operating without permission.

The EU

  • Binance in July said it would suspend deposits from the European Union's Single Euro Payments Area network.

Germany

  • Binance earlier this year launched stock tokens, a sort of synthetic instrument that gives commission-free exposure to traditional stocks such as Apple and Tesla. The tokens were being offered through CM-Equity AG, an established company that would hold the underlying stocks.

    Germany's financial regulator said the tokens would violate European Union securities laws. In July, Binance said it would no longer offer the tokens, though CM-Equity's CEO told the Block that it was a "business decision" and Binance wasn't forced to stop.

Thailand

  • Thailand's financial agency in July filed a criminal complaint against Binance, accusing it of operating a digital asset exchange without a license.

South Korea

  • South Korean regulators did not publicly come after Binance, but they did warn crypto exchanges to register. Binance shut down Korean language support and Korean-currency trading pairs in August.
Malaysia
  • Malaysia's financial regulator took an enforcement action against Binance and ordered it to stop operating in the country. In August, Binance shut down access in the country.

China

  • Though Binance has largely moved itself out of Beijing's reach, China's continued tightening of crypto trading rules inevitably affects customers in the country who might try to use the exchange.

The mystery of Binance's headquarters

The global troubles raise a question: Where is Binance? The company has long said it doesn't have a headquarters, preferring to be a decentralized company, a structure inspired by the headless nature of cryptocurrencies. But regulators have been skeptical of that stance. Now Binance appears ready to set down roots — though where is still not clear.

"Four years ago when we started it, we wanted to embrace the decentralized model so we wanted to have decentralized teams everywhere. But we do run one centralized exchange, which is the biggest part of our business. Now we have come to realize that for the regulators, we need to be centralized," CEO Changpeng Zhao said in a recent interview with the Block..

In 2019, Binance said it would stop allowing U.S. users to access the exchange. But it wasn't until last November that Binance blocked U.S. users from accessing Binance.com, its main site. It moved those users to Binance.US, which is run by a separate company, BAM Trading Services, and has a much smaller selection of tokens.

The moves came after another crypto exchange, BitMEX, was charged by the CFTC and Justice Department with violations of know-your-customer rules, among other laws.

Forbes reported last year that Binance had an elaborate plan to avoid U.S. regulation through a U.S. based entity and evasion of "geographical restrictions" through "technical workarounds" — charges which Binance denied.

Crypto traders in the U.S. or other regulated jurisdictions have long known that it's possible to use a VPN to access Binance, according to crypto investors.

Moreover, crypto's global market makes the company less concerned about regulatory pressures in the U.S.

But the uncertain regulatory landscape appears to have contributed to churn in its top ranks. In August, Binance.US CEO Brian Brooks, former head of the Office of the Comptroller of the Currency, quit after three months on the job, citing strategic differences. Binance named Brian Shroder, previously of Ant Group and Uber, as president of Binance.US in September.

Protocol will update this summary of Binance's regulatory challenges from time to time. To make sure you get the latest news on Binance and other crypto companies, subscribe to Protocol | Fintech.

Workplace

The tools that make you pay for not getting stuff done

Some tools let you put your money on the line for productivity. Should you bite?

Commitment contracts are popular in a niche corner of the internet, and the tools have built up loyal followings of people who find the extra motivation effective.

Photoillustration: Anna Shvets/Pexels; Protocol

Danny Reeves, CEO and co-founder of Beeminder, is used to defending his product.

“When people first hear about it, they’re kind of appalled,” Reeves said. “Making money off of people’s failure is how they view it.”

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Sponsored Content

Foursquare data story: leveraging location data for site selection

We take a closer look at points of interest and foot traffic patterns to demonstrate how location data can be leveraged to inform better site selecti­on strategies.

Imagine: You’re the leader of a real estate team at a restaurant brand looking to open a new location in Manhattan. You have two options you’re evaluating: one site in SoHo, and another site in the Flatiron neighborhood. Which do you choose?

Keep Reading Show less

Elon Musk has bots on his mind.

Photo: Christian Marquardt/Getty Images

Elon Musk says he needs proof that less than 5% of Twitter's users are bots — or the deal isn't going ahead.

Keep Reading Show less
Jamie Condliffe

Jamie Condliffe ( @jme_c) is the executive editor at Protocol, based in London. Prior to joining Protocol in 2019, he worked on the business desk at The New York Times, where he edited the DealBook newsletter and wrote Bits, the weekly tech newsletter. He has previously worked at MIT Technology Review, Gizmodo, and New Scientist, and has held lectureships at the University of Oxford and Imperial College London. He also holds a doctorate in engineering from the University of Oxford.

Policy

Nobody will help Big Tech prevent online terrorism but itself

There’s no will in Congress or the C-suites of social media giants for a new approach, but smaller platforms would have room to step up — if they decided to.

Timothy Kujawski of Buffalo lights candles at a makeshift memorial as people gather at the scene of a mass shooting at Tops Friendly Market at Jefferson Avenue and Riley Street on Sunday, May 15, 2022 in Buffalo, NY. The fatal shooting of 10 people at a grocery store in a historically Black neighborhood of Buffalo by a young white gunman is being investigated as a hate crime and an act of racially motivated violent extremism, according to federal officials.

Photo: Kent Nishimura / Los Angeles Times via Getty Images

The shooting in Buffalo, New York, that killed 10 people over the weekend has put the spotlight back on social media companies. Some of the attack was livestreamed, beginning on Amazon-owned Twitch, and the alleged shooter appears to have written about how his racist motivations arose from misinformation on smaller or fringe sites including 4chan.

In response, policymakers are directing their anger at tech platforms, with New York Governor Kathy Hochul calling for the companies to be “more vigilant in monitoring” and for “a legal responsibility to ensure that such hate cannot populate these sites.”

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

We're answering all your questions about the crypto crash.

Photo: Chris Liverani/Unsplash

People started talking about another crypto winter in January, when falling prices had wiped out $1 trillion in value from November’s peak. Prices rallied back in March, restoring some of the losses. Then crypto fell hard again, with bitcoin down more than 60% from its all-time high and other cryptocurrencies harder hit. The market’s message was clear: Crypto winter was no longer coming. It’s here.

If you’ve got questions about the crypto crash, the Protocol Fintech team has answers.

Keep Reading Show less
Latest Stories
Bulletins