Crypto exchange Binance faces US money laundering probe
It's turning out to be another duly eventful year for crypto. In the span of five months, meme currency Dogecoin has seen prices spike, PayPal has opened cryptocurrency trading and Tesla performed a u-turn on Bitcoin payments. Adding to the volatility, conflicting reports claim the world's largest cryptocurrency exchange, Binance, is under investigation by the US Department of Justice and the Internal Revenue Service (IRS).
According to Bloomberg, officials interested in how crypto
is being used for money laundering sought information from those familiar with
Binance's dealings. However, the publication did not confirm whether the
investigations were tied to criminal violations, claiming that not all inquiries
stem from "allegations of wrongdoing."
Binance's CEO Changpeng Zhao was quick to interject with his
side of the story. Without explicitly naming the article, he tweeted that the
"news" painted his company in a negative light. According to Zhao, Binance
had “collaborated with law enforcement agencies to fight bad players,” adding
that the story made that "look like a bad thing."
However, the fact is the cryptocurrency exchange — which is
banned from operating in the US — has been fielding money laundering
allegations for a while now. A recent report from blockchain forensics firm
Chainalysis said Binance was a top destination for illicit cryptocurrency in
2019.
Regulators are also investigating whether Binance permitted
Americans to make illegal trades, sources told Bloomberg. It's prohibited from
doing business in the US because it offers securities that aren't registered
with the Commodity Futures Trading Commission. Though the company has
repeatedly rejected the claims, crypto news sites have said its restrictions on
Americans can easily be bypassed. Bloomberg adds that Binance also previously
advised Americans to use a VPN to hide their location when seeking access to
its exchange.
The company's entanglement with federal law enforcement
arrives amid growing regulatory scrutiny of cryptocurrencies. US officials
worried about the lack of oversight over digital assets fear they are being
used to cover up illegal transactions, including drug deals. Meanwhile, the IRS
has reportedly been expanding its ability to track individuals who owe taxes
based on cryptocurrency investments. If you ask experts, they'll tell you that
lawmakers are facing the eternal dilemma of playing catch-up with technological
innovation.
Binance was founded in China, but was forced to move out of
the country in the wake of a ban on crypto trading in 2017. It is now
incorporated in the Cayman Islands, according to Bloomberg, a notorious tax
haven used by corporations and the wealthy to hide their finances.
Yesterday, the company issued a statement on Twitter
asserting its compliance with US laws. "We take our legal obligations very
seriously and engage with regulators and law enforcement in a collaborative
fashion," Binance said. "We have worked hard to build a robust
compliance program that incorporates anti-money laundering principles and tools
used by financial institutions to detect and address suspicious activity."
The company continued: "We have a strong track record
of assisting law enforcement agencies around the world, including in the United
States."
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