The cryptocurrency industry is a large one and there is a lot required to keep it running. There are many factors that influence the industry and exchange platforms are a great example. Exchange platforms are responsible for the trading and swapping of digital assets across an array of portfolios. Binance is one of the most prominent exchanges so far.
Binance as a Platform
Despite the amazing successes and the envious strides that this platform is taking, it has been subjected to heavy regulatory pressure recently. Its services have been clamped down on in several locations around the globe as it has allegedly failed to heed local compliance policies. The outlook is not looking so good and has triggered a lot of speculation among crypto enthusiasts and influencers.
Although Binance is a leading cryptocurrency trading platform, it is just one amongst many. The reason for its controversial crackdowns across several governments has been a puzzle to many in the crypto community. In this article, we are going to explore the circumstances that led to the suspension of Binance operations in these locations and what it means for the crypto industry.
A Look into Recent Binance’s Latest Regulatory Limitations
The Chinese-born exchange has been a consistent victim of policy violations set by financial watchdogs in several countries. Following the ban on crypto derivatives by the Financial Conduct Authority (FCA), the crypto exchange was banned from operating within the jurisdictions of the United Kingdom. The FCA wasn’t satisfied with the measures that Binance is employing to safeguard investors from the volatility of digital currencies and therefore took to action.
The aftermath of the ban was very evident as the world-renowned Barclays Bank halted the facilitation of payments to Binance. Millions of users who use the bank for trading were enraged by the decision and heavily criticized it. Unfortunately for those who jumped ship from Barclays, other banks like Santander followed.
Making matters worse, Binance has halted euro payments made via one of the most reputable channels, SEPA. The payment channel made it possible for users to send payments to more than 30 countries. With the recent change, users would only be able to make withdrawals using the medium, deposits are prohibited.
Other Regulatory Issues
Before now, Binance had been in a few regulatory scuffles with other locations. On the 25th of June, the exchange was prohibited from operating in Japan by the Financial Services Agency (FSA) for not registering. The complications doubled the same day as the company announced that it was stopping trade in the Canadian province of Ontario over regulatory misunderstandings.
Thailand’s Securities and Exchange Commission also joined the list of Binance antagonists on the 6th of July as it declared that Binance was conducting services without a license in the country. Generally, all crypto exchanges aside from Binance are facing increased limitations from sovereign entities all over the globe. However, Binance appears to be the most noticeable out of all of the exchanges that have expanded to other shores because they seem to be consistently operating in a non-compliant way.
The Grounds for Binance’s Regulatory Issues
Financial regulators for quite some time now have been antagonistic towards the concept of some digital currencies. For instance, the United States Securities and Exchange Commission (SEC) has repealed innovations from the industry citing volatility concerns and potential manipulation by the supposed private owners of the digital currencies. THis problem is exacerbated when exchanges like Coinbase are found to have manipulated prices through wash trading.
Trading cryptocurrencies are not considered to be in the same category as financial markets like stock trading. This is the reason the US SEC is warning investors from investing in them especially in derivatives and perpetual contracts. Aside from the above, they are perceived to be channels for the perpetration of financial crimes like money laundering and illegal gambling.
Binance is one among the many exchanges that have been accused of offering services to money launderers who siphon large funds leveraging the anonymous feature that cryptocurrencies offer. However, the resistance goes beyond the volatility of cryptocurrencies in certain cases. For instance, Binance has been accused of refusal to comply with regulatory requirements, defy registration orders, and operating without a license.
The Impact on the Crypto Industry
Cryptocurrencies are a relatively new industry. Most Governments, individuals, and institutional entities are yet to grasp the fundamentals surrounding their development.
Since the crypto market is classified as emotional (as most markets are), investors are likely to react by pulling out from the market till the fear reduces, thereby strengthening the volatility. Unfortunately, many are realising that regulation may be inevitable and exchanges like Binance are only creating a worse environment for incoming regulation.
Instead of resisting every little bit of regulation and drawing scrutiny and a crackdown – Binance should have worked to operate in a loose regulatory framework like many other crypto exchanges. In the long run this means that regulators are less likely to bring in bans or other big-stick measures to clamp down on crypto.
What Binance is Doing About it
The cryptocurrency exchange platform Binance for a long period has remained mute to the allegations. However, Chief Executive Officer Changpeng Zhao popularly known as “CZ” has stepped out to clear the air in a recent announcement. The executive reflected on the growth of the platform and their desire to offer users the best service by complying with financial regulations.
Binance has enacted new policies to reiterate its dedication. CZ likened the development of crypto to other eminent sectors that gradually developed like the automobile industry till they became indispensable necessities.
Binance would be making efforts to grow its international compliance team twice its current size to ensure that they stayed within the legal confines of host entities. The exchange would also expand compliance partnerships to crack down on financial irregularities through its channel. Operations would also be localized to ensure total balance in adherence to local regulations.
A look into the primary reasons for the ban of crypto trading platforms like Binance avails us the opportunity to access the deficiencies of their operations and how further restrictions can be avoided so that the industry can attain its full potential.