Key Takeaways:
Binance US, the American wing of the world’s largest cryptocurrency exchange Binance, is facing an unprecedented crisis in the country after several states either revoked or refused to renew its money transmitter license.
US States Including Florida and North Dakota Refuse to Do Business with Binance
US states of North Dakota, Alaska, Florida, Maine, North Carolina, and Oregon are refusing to provide the crypto exchange with the license that would allow it to engage in money transmission activities, which includes receiving money or cryptocurrency to send to a location within or outside the United States on another person’s behalf.
The action seems to have stemmed from compliance issues and legal troubles associated with Binance’s founder and former CEO, Changpeng ‘CZ’ Zhao, who is currently serving a four-month prison sentence in the US for violating anti-money laundering laws.
On June 17th, the North Dakota Department of Financial Institutions Commissioner issued a statement explaining why the decision was made. The agency found that BAM Trading Services, Inc. doing business as Binance US failed to comply with state laws, and its majority owner and “control person”, Changpeng Zhao, pleaded guilty to felony charges for violating AML laws.
Zhao’s sentence is part of Binance’s settlement agreement with the US Department of Justice (DoJ). In November, the crypto exchange agreed to pay the Justice Department $4.3 billion in fines and penalties while CZ pleaded guilty to breaches of the Bank Secrecy Act.
Binance at Risk of Losing US Market
Other states have also taken regulatory action against Binance US, citing compliance issues. Following Zhao’s guilty plea to violating federal financial laws, Florida suspended the company’s money transmitter license. Binance US is headquartered in the Sunshine State.
However, last month, a state appeals court ruled in favor of Binance, stating that Floridian regulators improperly blocked the crypto exchange from operating in the state. The judge criticized authorities for not justifying the suspension, highlighting the financial risk their decision posed to customers.
As things stand, Binance can resume operations in Florida but still faces regulatory hurdles elsewhere.
In early January, Alaska decided not to renew Binance US’s money transmitter license. This was followed by North Dakota suspending the permit on January 23rd, and Maine refusing to renew it on January 29th. Later in April, Connecticut and Oregon joined the ranks by suspending and revoking Binance’s license.
Last May, Binance downsized its global workforce by around 20%, affecting over 1,000 employees. Then in September, Binance US announced that over 100 staff members would lose their jobs. Among the departures was CEO Brian Shroder, who stepped down from his role following regulatory action against the company.
Binance blamed its misfortunes on the Securities and Exchange Commission’s (SEC) crackdown on the crypto sector. A spokesperson for the company stated that the securities regulator’s aggressive efforts to undermine the industry had a tangible effect on jobs and innovation in America.
During the legal proceedings, the SEC expressed concerns about Binance’s lack of cooperation in the case discovery process. The financial watchdog claimed that Binance US’s parent company submitted unintelligible screenshots and provided unsigned and undated documents.
The repercussions of these decisions are vast and could affect the entire US crypto industry. Other states where Binance is still operational could follow suit and be prompted to scrutinize the operations of other crypto firms.
US Government’s Action Against Binance Could Have Repercussions Worldwide
Furthermore, Binance’s investors and users may start to lose confidence in the platform. This could lead to a decrease in trading volumes as they migrate to competing exchanges. The US government’s action could influence regulators in other countries to intensify their oversight of Binance’s activities.
Earlier this year, Binance was booted from India for failing to comply with the country’s financial laws. In April, the crypto exchange announced that it was returning to one of its largest markets by registering as an entity with the Financial Intelligence Unit (FIU), which oversees the trade of virtual digital assets.
Binance agreed to comply with all applicable laws, including the Prevention of Money Laundering Act (PMLA) and the VDA taxation framework. The crypto giant will pay a $2 million fine for its violations.
More News: Binance US Ceases Service In Alaska And Florida Following CZ’s Guilty Plea.
