Binance Boosting Compliance and User Protection to Win Government Approval
There is an increasing attempt to tighten regulatory efforts on cryptocurrency exchanges globally. This is due to concerns bordering on money laundering and investor security when it comes to decentralized digital assets.
Binance, the largest cryptocurrency exchange by trading volume is one of those taking the heat. The exchange has faced a number of regulatory challenges recently. The most recent are with the UK and Japanese governments. In the U.K, the government asked Binance to stop operations in the country because it has not met the anti-money laundering standard of the UK.
This thwarted Binance’s plans to establish its own digital asset marketplace in the country. Although the ban did not stop the exchange from offering trading and other services to British users, not being allowed to offer any regulated services is a major hindrance to the growth of the exchange in the country.
Around the time that Binance was facing regulatory troubles in the U.K., Japanese authorities issued a warning to the exchange. Binance was accused of operating in the country without permission. A spokesperson for the exchange confirmed to CoinDesk that it had no regulatory permission to operate in the country. These are just two of a number of issues the exchange has faced over the years.
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In a bid to ensure compliance with governments in countries where it operates, Binance has started taking some steps to ensure that its users are protected and that all regulatory standards are adhered to. These efforts include:
AML and CFT campaigns
The reason many crypto users are exposed to many scams and lose funds is because of lack of understanding of how the space works. Binance is making efforts to educate its users to escape such pit traps by encouraging users to complete KYC, improving users’ awareness and learning of AML (including internal education and testing). The exchange has an arm known as Binance Academy, dedicated to educating its users on cryptocurrency and how it works.
In particular, Binance lays emphasis on Anti-Money Laundering education and awareness. This is to prepare its users to not become victims of money laundering and to keep them from committing such crimes as well. A major point of focus which is also of great significance to governments around the world is Combating of Financing of Terrorism (CFT).
Responsible trading campaign
Crypto trading is an easy way to lose money and that is of great concern to regulators. Many retail traders jump all in on crypto trading and easily lose their entire investment in a short time, mainly due to a lack of responsible trading emanating from greed. Binance has launched a campaign to enlighten its users on how to trade responsibly and minimise their risks. This will greatly help to reduce the loss of investment by its customers, which could significantly improve its image internationally.
Binance’s security campaign is aimed at enlightening users on how to stay safe from malicious attacks and scams when online. The exchange takes users through practical steps to avoid these security issues when they are online. These include phishing and hacking attacks which have become commonplace in the cryptocurrency space.
Binance has been hiring staff in compliance roles recently. The exchange has opened several senior compliance positions both globally and locally. This is to ensure that every action the management takes is guided and in line with local regulatory conditions in its offices worldwide.
Products launched by Binance are also geared towards achieving regulatory compliance. These include:
Binance launched Binance USD (BUSD), a fully regulated stablecoin that is pegged against the U.S Dollar. Being a fully regulated stablecoin, it is completely safe for users to use for buying and selling. It protects them from the volatility of the market and also leaves no room for scams, which are among the vices currently faced in the space.
Tax tool API
To ensure that Binance users comply fully with the tax requirements of local regulatory bodies, the exchange launched a crypto tax API at the end of July 2021. The tool will help to ensure that the users keep track of their crypto trading activities to help them fulfill their reporting obligations in their countries. Users can generate a read-only transaction history and records of capital gains and losses on Binance with local tax officials. They can also get real-time summaries of their local tax liabilities.
More exchanges taking similar steps
Other crypto exchanges have taken similar steps towards reaching the same goal as Binance. Among them are Huobi which has suspended futures and margin services. These are major ways through which crypto traders can easily lose funds. Singaporean exchange ByBit has placed a restriction on Chinese users’ access to its API interface while FTX and other exchanges have reduced their margin levels, all in a bid to reduce the risk of trading.
With these steps that Binance is taking, the exchange is clearly on its way to fully embracing supervision and complying with the regulatory demands of its host countries. This is likely to improve its image and encourage cordial relationships with the governments to ensure their smooth operations.
Other exchanges taking similar steps is also a good development for the crypto industry as a whole. By limiting the level of risk users of exchanges are exposed to through actions such as reducing margin levels, there will be a lower probability of loss which could further increase the level of trust and confidence in cryptocurrency from both governments and cryptocurrency users generally.