The world’s largest cryptocurrency exchange, Binance, led the partial recovery of the cryptoasset market after the collapse of the FTX exchange and a series of scandals in 2022. However, high market volatility has led US regulators to investigate Binance’s activities and raise serious questions.
On March 27, the Commodity Futures Trading Commission (CFTC) filed a complaint against the cryptocurrency exchange for allegedly deliberately evading US law. The CFTC alleges that Binance brokers cryptocurrency derivatives trades for retail investors without being registered with the commission, in violation of US trading laws.
In addition, Binance and its CEO allegedly violated these laws by secretly training VIP customers on how to circumvent controls. Binance believes it is not subject to US law because it is not headquartered there, but experts believe the company could have to pay “hundreds of millions of dollars” in fines and could be banned from registering to exchange derivatives in the future, which would be “a terminal blow to users of its service located in the US.”
The company has already suffered a $1.6 billion withdrawal from the platform following the CFTC’s lawsuit, and the losses could be the tip of the iceberg for Binance, as its US users account for 16% of derivatives revenue. In March, The Wall Street Journal reported that Binance had developed a US platform, Binance.US, to avoid US regulators’ scrutiny of the main company and its users.