The world’s largest crypto exchange, Binance, was hit with a double-whammy of bad news today. First, the exchange was accused of enabling money laundering on its platform — and second, the U.S. Securites and Exchange Commission announced an investigation into the platform’s $BNB token.
The first of these charges might be even more spicy than the toothy regulatory battle that might await the company. Reuters reported today that Binance processed at least $2.35 billion worth of transactions from hacks, investment frauds, and narcotics sales from 2017 to 2021. Among their charges were that the platform skimped on Know Your Customer (KYC) and Anti-Money Laundering (AML) checks.
Among their chief concerns is that the company became a “hub” for these illicit trades and dealers. They cited North Korea’s involvement in a hack on a Slovakian exchange called Eterbase among a slew of other eye-raising events. And though $2.35 billion might not sound like a lot, that’s just what Reuters knows of.
The company’s CEO, Changpeng Zhao, responded to the claims about the company’s crypto money laundering in a tweet published at 6:32pm today. The tweet, which links to a blog post made on the Binance blog, says that “the machine” (media) are selling a false narrative. In it, the company includes 50+ pages of correspondence between Binance and journalists.
One of the exchange’s chief conclusions? That 0.15% of transactions made with cryptocurrencies in 2021 were “associated with some type of illicit activity.” They cite a UN statistic that says that between 2-5% of cash is involved in illicit activity. “Crypto is incredibly transparent, infinitely moreso than the traditional cash economy, and this is well documented.”
That news led down river to a separate, but perhaps even more disappointing piece of news for the exchange: that one of America’s biggest finance watchdogs was investigating whether the company violated securities law by issuing its “exchange token”, Binance Coin.
Binance Coin has grown to become the fifth-largest cryptocurrency (including stablecoins), in part because of the utility it has gained off-exchange: the crypto’s Binance Smart Chain is the second-largest chain by TVL and has hundreds of DeFi projects operating.
Binance did its ICO of the $BNB token in July 2017, which was around the time that Binance’s exchange opened. Since a U.S. resident participated in the ICO, the SEC has free reign to pursue a securities suit. The regulator has already brought cases against projects which issued tokens to consumers, including most famously Ripple Labs.
The company did not issue comment regarding the SEC’s potential investigation, which could develop into a legal action against the exchange’s holding company if the regulator finds grounds to proceed.