Proactive Investors - Binance, the world’s largest cryptocurrency exchange, is back in the regulatory crosshairs, this time being accused by the US Commodity Futures Trading Commission (CFTC) of “wilful evasion” of US commodities law.
In a statement released by commissioner Kristin N. Johnson, the regulator alleged that Binance chief executive Changpeng ‘CZ’ Zhao and chief compliance officer Samuel Lim were “operating the enterprise through a complex web of firms with the goal of using this operational infrastructure to shield Binance from complying with existing regulations in any of the jurisdictions where the firm operates”.
Binance is registered in the offshore jurisdiction of the Cayman Islands, but subsidiary Binance.US offers a limited platform to US customers purportedly in line with US regulations.
However, the CFTC alleges that Zhao and Lim “deliberately disregarded these requirements”, while Binance’s compliance programme “was ineffective in complying with the law”.
The CFTC has specified that Binance’s facilitation of commodity futures, options, swaps, and retail commodity transactions to US customers violates the Commodity Exchange Act.
CZ called the claims “unexpected and disappointing” in a blog post, adding: “The complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterisation of many of the issues alleged in the complaint.”
CZ promised full responses in due time.
The civil action from the CFTC may come as a surprise to some, since the regulator is generally seen as less hawkish on the digital asset market than its securities law counterpart the Securities and Exchange Commission (SEC).
The two regulators have been meting out their claims to jurisdiction in the digital asset space in recent years.
The cross-party Digital Commodities Consumer Protection Act introduced to the Senate in August 2022 aims to give the CFTC greater jurisdiction over crypto spot markets and was met with comparative favourability in the crypto space compared to the SEC’s regulatory approach.