Binance can’t seem to get away from this image that it’s willing to do anything and everything to maintain its top spot in the crypto exchange game, even if that means allowing trade from users in sanctioned nations.
Reuters reported Monday, based on several interviews with traders, that Iranians continued to operate on the Binance exchange despite 2018 U.S. sanctions against their home country. These trades were apparently going on until September of 2021. One trader from Iran, a business development worker named Mehdi Qaderi, used a VPN to trade around $US4,000 ($5,553) on Binance, saying that “all the Iranians were using [Binance].”
Reuters also mentioned they found another 11 people in Iran other than those interviewed who on their LinkedIn profiles declared they traded crypto on Binance.
Reuters did not find evidence of any specific individuals who have been sanctioned in Iran using Binance. Still, Iranian crypto traders quoted by Reuters said that while there were other alternatives, “none of them were as good as Binance.”
And not only did the company allow those trades, they knew of and even joked about them, according to internal communications detailed in Reuters’ report. Senior employees reportedly sent messages to each other over the course of 2019 and 2020, one of them glorifying the expanding number of Iranian users, calling them “IRAN BOYS.”
Binance is easily the biggest crypto exchange by trading volume, according to CoinMarketCap, and it’s not even close. The company advertises it operates 1,681 markets, where the next biggest, FTX, operates 419.
But there’s still a lingering question of which countries’ regulations Binance must adhere to. Binance’s holding company is based in the Cayman Islands, and its main Binance.com exchange is not available in the U.S. Instead, American customers use Binance.us, a separate company that is still controlled by company CEO Changpeng Zhao. Lawyers who spoke to Reuters said the company might be protected from main U.S. sanctions, but could come under the hammer of injunctions that try to prevent foreign companies from doing business with countries like Iran.
Iranian users were reportedly allowed to exist on the platform — only requiring an email address to sign up — until September 2021 when the company doubled down on its anti-money laundering checks, according to the report.
In an email statement to Gizmodo, a Binance spokesperson said:
“We have assembled a globally recognised compliance and regulatory program that has been our core objective over the past 18 months… This industry-leading sanctions program is fully compliant with all international financial sanctions, including blocking platform access to users in Iran, North Korea, among many others. We have also implemented advanced detection tools that allowed us to further crackdown on users in sanctioned regions that had access to sophisticated masking tools including VPNs.”
The spokesperson added they have secured registration and approvals to operate in the G-7 countries France and Italy.
Zhao took to Twitter Monday morning to effectively hand-wave the allegations, saying “Binance has been using Reuters WorldCheck as one of the KYC verification tools since 2018… it is the golden standard all banks use. But when we use it, they still write FUD about us.”
To be fair, it is the golden standard all banks use. But when we use it, they still write FUD about us.
— CZ 🔶 Binance (@cz_binance) July 11, 2022
For those not attuned to the acronym soup, KYC stands for “Know Your Customer” verification, which is used to identify and verify customers, which would include verifying if they’re located in sanctioned nations. FUD, in the context of crypto, stands for “fear, uncertainty, and doubt,” a phrase often used to dismiss any negative news in practically any conversation about the honest efficacy of crypto-related companies.
It’s not the first time the company has been cited in reports for facilitating users from — and even the governments of — sanctioned nations. Back in April, Reuters reported based on leaked internal messages and anonymous interviews that the crypto trader agreed to hand over the names of people who donated to political opponents of President Vladimir Putin to Russian authorities.
So there is certainly a heap of fear about regulatory agencies coming down on the crypto exchange, evident by the number of public posts Binance has put out in relation to its KYC policies and attempts to adhere to sanctions. In a Monday blog post, Binance Global Head of Sanctions Chagri Poyraz wrote that “We do not allow access from countries like North Korea, Syria, Cuba, and Iran, to name a few, specifically because we believe in following international sanction laws.”
Poyraz also said “very few people understand the technology, let alone global sanctions laws.” He wrote they were employing “the most sophisticated KYC and transaction monitoring technology.” Still, he added “we cannot simply port over an established sanctions program from the banking industry.”
And it’s not just the ire of U.S. regulators that Binance has to be concerned with. A Bloomberg report last month detailed how Binance and its founder Zhao promoted TerraUSD, the stablecoin that would eventually prove incredibly unstable, ultimately leading to this ongoing crypto winter. The company lost nearly $US1.6 ($2) billion in that crash, according to Bloomberg. Binance later suspended withdrawals for a few hours in June “due to a stuck transaction causing a backlog.”
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