Binance Restricts Money Laundering Checks After Regulatory Pressure

The leading cryptocurrency exchange, Binance, said on Friday that it will require more stringent background checks on clients to bolster anti-money laundering efforts, with immediate effect.

Binance, the world’s largest platform, has come under pressure in recent months from regulators around the world who are concerned about the potential for money laundering encryption and the risks to consumers of the volatile encryption trade.

The exchange, whose holding company is registered in the Cayman Islands, has scaled back its product offerings, including leveraged trades and equity-linked tokens, and said it wants to improve relations with regulators.

The potential of cryptocurrency exchanges for money laundering has long worried regulators, with US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde among those who have expressed concerns this year.

The Dutch central bank said on Monday that Binance was not complying with its anti-money laundering and terrorist financing laws.

Binance said on its website that users would have to complete a verification process to access its products and services. Those who have not, will only be able to withdraw funds, cancel orders and close positions.

Until now, document-based ID checks at Binance were only necessary for users who wanted higher trading limits. Users will now have to carry an identity card, driver’s license or passport to prove their identity, Binance said.

“This will further enhance user protection and fight financial crime,” the report said of the change.

Binance CEO Changpeng Zhao, a Canadian known by the nickname “CZ”, tweeted a link to Binance Ad saying “actions speak louder than words”.

The steps taken by encryption switches to do identity and background checks remain varied, with some requiring complete documentation and others allowing users to sign up for accounts with just an email address.

Binance’s spot trading volumes in July were $455 million (about Rs. 3,384 crores), down almost a third from the previous month, but it is still No. 1 globally, according to data from CryptoCompare.

Binance’s corporate structure is opaque, although its holding company is registered in the Cayman Islands, according to British court documents and the Malaysian securities regulator.

© Thomson Reuters 2021

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