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Binance Struggles With Regulations

Binance already has problems operating in at least six countries. The exchange announced implementing a tool to comply with the Travel Rule.

Binance struggles with regulations imposed by some countries.
Binance struggles with regulations imposed by some countries (Photo by Bill Oxford, @bill_oxford on Unsplash)

In Short

  • Binance wants to avoid further bans like those in the U.K.

  • The tool facilitates compliance with the FATF's Travel Rule.

  • The Cayman Islands and Thailand are the latest to ban Binance operations.

  • Various countries are trying to limit unauthorized financial activities.

The exchange of bitcoin (BTC) and other cryptocurrencies, Binance, announced the implementation of CipherTrace Traveler, a tool created for compliance with the Travel Rule, recommended by the Financial Action Task Force (FATF). They will produce reports on the issuing and receiving information of users making transactions between exchanges.


In a statement, Binance's chief compliance officer, Samuel Lim, indicated that the intention is to provide a "superior" product for its users "that is secure, decentralized and meets global compliance standards" to address increasing regulatory pressure from state agencies. It is worth remembering that the FATF is a group dedicated to the fight against money laundering and financing terrorism on a global scale.


All service providers with virtual assets, including exchanges, must adopt the so-called "travel rule" regulation. The objective is to share information about those users who carry out transactions exceeding $1,000.


Binance will implement CipherTrace Traveler to comply with the rule, a solution designed to facilitate compliance among virtual asset service providers (IDPs), including cryptocurrency exchanges. In that sense, the text indicates that with Traveler, it will be possible to detect funds originating from illicit activities so that Binance can take the corresponding actions.



What information does Traveler report?

Traveler facilitates the reporting of various transaction data between different virtual asset providers, including exchanges and custodians, over-the-counter (OTC) exchanges, banks. If the FATF regulation update is approved, it will even include Decentralized Finance (DeFi) tools.


The information Traveler would share the name, address or identity number, identity of the financial institution, account number (both sender and receiver), the amount sent and the day of execution, and any other specific data about the receiver.

CipherTrace CEO Dave Jevans said, "Traveler will help Binance continue to meet the highest standards of global anti-money laundering compliance, especially as VASP regulation tightens in jurisdictions around the world."

Traveler meets the regulatory requirements set by FATF. Source: CipherTrace.
Traveler meets the regulatory requirements set by FATF. Source: CipherTrace.


Binance suffers a setback in the U.K.

In recent days, Binance faced limitations on trading certain products in the U.K., so implementing the travel rule raises the speculation that it wants to avoid trouble with international regulators.


The U.K.'s financial watchdog, known as the Financial Conduct Authority (FCA), banned Binance Markets Limited from carrying out any financial activity that requires regulation in the country without its authorization. The exchange's response was swift, and they assured that they would adopt a "collaborative approach" to work based on that country's legislation.

FATF goes against the privacy of Bitcoin

The FATF travel rule is a regulation that has caused an uproar in the bitcoin community because of its effect on users' privacy.


Organizations such as Coin Center, which advocates for user's rights over open blockchain networks, have rejected the FATF rule regarding the use of Bitcoin, cryptocurrencies, and service providers that enable P2P exchanges as a problem for "privacy and innovation."


On the other hand, according to a particular sector of the bitcoin community, the anti-money laundering measures proposed by the FATF have resulted in very high costs in terms of financial exclusion, commercial friction, bureaucracy, and regulatory compliance, violation of privacy, and so on.



Two more countries banned Binance operations

In the last hours, the Cayman Islands and Thailand restricted the cryptocurrency exchange Binance in their territory. Even a public body made a complaint in the Asian country. Thus, they join the United Kingdom, Singapore, Japan, and Malaysia, nations that took similar measures in the recent past.


This Thursday, Thailand denounced the cryptocurrency exchange Binance. The Thai SEC said that it filed a criminal complaint with the Economic Crime Eradication Division of the Royal Thai Police. According to the entity, the firm had received a warning in April, to which it never responded.


For its part, the Cayman Islands Monetary Authority informed that both Binance Group and Binance Holdings Limited are not "registered, licensed, regulated, or authorized" to operate as a cryptocurrency exchange within or from its jurisdiction. In addition, the agency added that it is studying whether the firm carries out other activities that fall within its regulatory orbit.


The company says it does not operate a cryptocurrency exchange from the Cayman Islands. Still, other companies carry out other activities permitted under the island's laws, according to Decrypt. However, Binance did not specify which ones these are.

Binance and its regulatory challenges in other countries

In addition to Thailand and the Cayman Islands, Singapore is another nation where Binance has suffered regulatory setbacks. As reported by Bloomberg, Singaporean authorities said they would evaluate the firm's permits to operate in the country, thus following the wave of states moving in this direction.


Precisely, one of them was the United Kingdom. On June 26, the Financial Conduct Authority banned Binance Markets Limited (BLM) from operating with cryptocurrency derivatives, a regulated activity in that territory. The FCA did not authorize Binance to operate with cryptocurrency derivatives. The company said that it is willing to collaborate to comply with all relevant regulations.


A few days earlier, Japan's Financial Services Agency issued a warning (Google translation) highlighting that Binance has no registration to operate in the Asian country. The problem mounts with a notification issued by the Malaysian government in mid-2020 about unauthorized activities Binance was conducting on its territory.

Binance's response

For the time being, Binance Group has been busy making clear its intentions to comply with each country's legislation. As stated above, the firm announced the implementation of CipherTrace Traveler, a transaction log that it will share with other exchanges about cross-platform transactions.


On the other hand, there is a history of successful operations that endorse Binance's commitment to collaborate with the State. For example, at the end of June, the exchange provided information that led to the arrest of an international network of hackers that laundered money on its platform.


According to the Binance's Terms of Use defined on its official site, the exchange "reserves the right to choose the markets and jurisdictions in which to conduct its activities, and may restrict or prohibit, at its discretion, the provision of Binance services in certain countries and regions."


According to CoinMarketCap data, it is the most widely used exchange globally, with more than 44 million weekly visits and a market volume that, just in the last 24 hours at the time of writing, exceeded $12.996 billion.



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