28th March 2023 – (New York) The Commodity Futures Trading Commission (CFTC), the top US markets regulator, has charged cryptocurrency giant Binance and its founder Changpeng Zhao with multiple violations. The charges against Binance, the world’s largest crypto exchange, were part of a campaign to “find and stop misconduct in the volatile and risky digital asset market,” said Rostin Behnam, chairman of the CFTC.
The allegations targeted Zhao, also known as CZ, and three entities that make up his crypto empire. According to Behnam, “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance.” Binance is accused of failing to uphold standards that are required of a company operating as a derivatives market and dealing with major US trading companies. Since July 2019, “Binance’s compliance program has been ineffective,” the statement said.
At Zhao’s direction, Binance employees and customers were directed to skirt compliance controls “to maximize corporate profits,” the regulator added. The charge sheet accuses Binance of failing to register as an outright asset trader, espousing the philosophy that cryptocurrencies belong outside the reach of financial rules. US media reports have said Binance is under investigation by US federal prosecutors, the Securities and Exchange Commission, as well as the Internal Revenue Service.
Regulators are increasingly keen for oversight of a sector which boomed during the Covid pandemic when many people were stuck at home and enticed by the big returns seen by trade in Bitcoin. The global crypto market stands at more than $1 trillion and has risen sharply in recent months, although it remains far below its 2021 peak of $3 trillion.
The action against Binance comes just a few weeks after a crisis in US regional banks wiped out two crypto-friendly lenders, Silvergate and Signature, making matters more complicated for the business. “This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law,” said Behnam. Binance faces consequences for its non-compliance with US law, and regulators will continue to scrutinize the cryptocurrency sector in the future.