Licensing

Breaking: Binance CEO CZ rejects allegations of market manipulation

Changpeng ‘CZ’ Zhao has refuted claims made by the Commodities Futures and Trading Commission in its March 27 complaint against Binance.

Binance CEO Changpeng “CZ” Zhao has rejected allegations from the Commodities Futures and Trading Commission, arguing that the crypto exchange “does not trade for profit or ‘manipulate’ the market under any circumstances.”

In a March 28 blog post, the chief executive responded to the CFTC’s lawsuit accusing Binance and CZ of engaging in improper compliance procedures and trading, calling the allegations “an incomplete recitation of facts.”

In its complaint, the CFTC alleged that Binance has traded on its own platform using 300 “house accounts” and did not make the proper disclosures to its customers that it was trading in its own market in its Terms of Use.

The CFTC has also accused Binance of keeping the information a “top secret” and alleged that the exchange refused to respond to commission-issued investigative subpoenas seeking information on its trading activity.

“On information and belief, Binance has not subjected the trading activity of Merit Peak, Sigma Chain, or its approximately 300 house accounts to any anti-fraud or anti-manipulation surveillance or controls,” the statement added.

Excerpt from the March 27 CFTC complaint. Source: U.S. District Court

However, CZ argued that while Binance “trades” in a number of situations, this is mainly to convert its crypto revenue to cover expenses in fiat or other cryptocurrencies.

“Personally, I have two accounts at Binance: one for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time to time to pay for my personal expenses or for the Card,” he added.

CZ also refuted claims that his staff engaged in “insider trading,” stating that Binance has a 90-day no-day-trading rule for employees, adding: 

“This is to prevent any employees from actively trading. We also prohibit our employees from trading in Futures.”

He went further to state that employees are restricted from buying or selling coins where they’ve obtained “private information” about them.

“I observe these policies myself strictly. I also never participated in Binance Launchpad, Earn, Margin, or Futures. I know the best use of my time is to build a solid platform that services our users,” he added.

Zhao called the recent CFTC filing both “unexpected and disappointing,” as it had been working cooperatively with the regulator for over two years.

The CFTC also alleged that senior members of the firm have “actively facilitated violations of U.S. law,” including “assisting and instructing” U.S. customers on ways to evade Binance’s own compliance controls, adding that Binance’s compliance program was just “For Show.”

Related: CFTC calls ETH a commodity in Binance suit, highlighting the complexity of classification

However, CZ denied being lax in compliance efforts. He stated that Binance.com has developed “best-in-class” technology to ensure compliance and currently has more than 750 people working to ensure the business operates within the bounds of Anti-Money Laundering (AML) and Know Your Customer (KYC) laws:

“To date, we have handled 55,000+ LE requests, and assisted US LE freeze/seize more than $125 million in funds in 2022 alone and $160 million in 2023 so far.”

CZ also pointed out that Binance.com holds 16 licenses to offer digital asset trading services, the most of any cryptocurrency trading platform.

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France on the verge of passing stringent crypto firm licensing laws

The bill was passed with a vote of 109 in favor and 71 against and will now rely on the approval of president Emmanuel Macron to be signed into law.

The French National Assembly has voted in favor of legislating stricter licensing rules for new cryptocurrency firms in order to harmonize local laws with proposed European Union (EU) standards.

The vote was passed with 109 votes (60.5%) in favor to 71 (39.5%) against. The French Senate has already passed the bill, which now goes to President Emmanuel Macron, who has 15 days to either approve it or send it back to the legislature.

If passed, the new law would oblige France-based cryptocurrency service providers to comply with stricter anti-money laundering rules, show that customer funds are segregated, adhere to new guidelines on reporting to regulators and provide more detailed risk and conflict of interest disclosures as a means to strengthen consumer protection.

The contents of the bill would not, however, apply to the 60 crypto firms registered with the Financial Markets Authority (AMF), the nation’s financial regulator. These firms will continue to comply with the AMF’s rules until the likely passing of the EU’s own crypto regulations with the Markets in Crypto-Assets (MiCA) bill.

The stricter rules would therefore only apply to crypto firms that register from July onwards.

Among the 60-AMF registered companies include Binance, which recently began piloting in-store payments in France with the cloud-based payment platform Ingenico via Binance Pay.

The legislative push for stricter licensing rules was initiated by Hervé Maurey, a member of the French Senate’s finance commission, who in Decemberproposed an amendment to eliminate a clause enabling crypto companies to operate without a full license until 2026.

Bank of France governor, Francois Villeroy de Galhau, also pushed the agenda in a Jan. 5 speech to members of the finance sector in Paris.

Related: Bitcoin business in France: Regulation, education and cash buy frustration

Like many regulators around the world, Villeroy de Galhau cited the need to respond to the recent turmoil in the cryptocurrency market as the motive behind the bill, which he wants to come into effect “as soon as possible.”

While MiCA will likely serve as the blueprint for cryptocurrency market regulation in the EU, he added that France simply couldn’t wait around for the more comprehensive laws enacting the licensing regime on digital asset service providers..

The EU is set to finally vote on MiCA regulation in April after two postponements. A successful outcome would likely see the highly anticipated crypto laws come into force sometime during 2024.