EXPLAINER-Binance: Crypto giant facing pressure from regulators

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LONDON, Aug. 19 (Reuters) – Financial regulators around the world have targeted the main cryptocurrency exchange Binance. Some have banned the platform from certain activities, while others have warned consumers that it is not licensed to operate.

Here are the answers to some key questions about Binance, the world’s largest exchange in terms of trading volumes, as regulatory pressure increases.

WHAT IS THE SIZE OF BINANCE?

In some ways, it’s the biggest platform in the world. Its transaction volumes in July were $ 455 million, down almost a third from the previous month in cooler crypto markets, but still No. 1 globally, according to data from CryptoCompare.

Binance also leads crypto derivatives trading, with volumes exceeding $ 1.4 trillion in July, a 55% share of the global market.

Binance is led by Changpeng Zhao, a Canadian known as CZ. The exchange offers a wide range of services to users around the world, from cash trading and cryptocurrency derivatives to loans and non-fungible tokens.

It also manages a decentralized exchange that allows users to exchange directly with each other. Its own cryptocurrency, Binance Coin, is the third largest in the world, with some $ 68 billion in circulation.

WHERE IS IT BASED?

It is not entirely clear.

Binance’s corporate structure is opaque. Its holding company is registered in the Cayman Islands, according to UK court documents and Malaysia’s securities watchdog here.

A Binance spokesperson said the company is decentralized and works with a number of regulated entities around the world.

Binance has built a huge following across the globe, with channels on the Telegram social media app for users in more than 30 countries.

On LinkedIn, Binance currently lists more than 1,000 vacancies, spread from Great Britain and the Netherlands to Hong Kong, Singapore and Taiwan.

AND IS IT UNDER REGULATORS?

Yes – all over the world.

The Dutch central bank said on Monday that Binance was not in compliance with laws against money laundering and terrorist financing.

A slew of other regulators – including those in Japan, Britain here, Germany, Italy, Hong Kong here and Malaysia – have also issued warnings against Binance in recent weeks.

Binance is also reportedly under investigation by the US Department of Justice and the Internal Revenue Service.

The platform said it takes its compliance obligations very seriously and is committed to meeting all regulatory requirements wherever it operates.

DOES THE CONTROL HAVE AN IMPACT?

Binance doesn’t release financial data, so it’s hard to say if this has affected its business.

Still, the stock market has made several notable moves as a result of regulatory pressure.

Binance CEO Zhao said last month that he wanted to improve relations with regulators. The exchange would seek their approval and establish a regional headquarters, he said.

Binance has also reduced some of its crypto product line that regulators can oversee.

Last month it announced it would end its futures and derivatives business across Europe, with users in Germany, Italy and the Netherlands among the first affected.

It also restricted trading in derivatives by Hong Kong users, saying the move was in line with our compliance commitment.

In July, Binance also stopped selling stock-linked digital tokens after regulators cracked down on its stock token. He also said he would stop offering crypto margin trades involving the Australian dollar, Euro and British pound.

This week, the company appointed a former U.S. Treasury criminal investigator as the global head of money laundering reports. (Reporting by Tom Wilson; Editing by Hugh Lawson)

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