Binance Tightens KYC Measures to Restrict US Access after Settlement with Authorities
Binance, the world’s largest cryptocurrency exchange in terms of trading volume, has come under scrutiny from US authorities for allowing US citizens to access its platform despite not being registered as a US business. Here is a closer look at the recent developments surrounding Binance’s efforts to comply with US regulations and restrict access to US users.
US Users and Binance- A History of Conflict
The presence of US users on Binance has been a point of contention for some time. Officially, US citizens are prohibited from using the main Binance exchange primarily due to regulatory restrictions. However, many US users are reportedly able to access the platform through methods like VPNs, bypassing these restrictions.
Court documents revealed in November 2023 provided details on the extent of US user activity on Binance. These documents showed that US customers significantly contributed to Binance’s rapid growth. Furthermore, former CEO Changpeng CZ Zhao and other Binance officials were alleged to have actively encourage high-value US clients to hide their locations using techniques like VPNs and APIs.
Binance Settles with US Authorities and Implements Stricter KYC
In November 2023, Binance and its former CEO, Changpeng Zhao, admitted to violation of the Bank Secrecy Act and agreed to a $4.3 billion settlement with the US Departments of Justice. This settlement addressed the allegations of fraud, money laundering, .and sanctions violation that have stemmed from Binance’s targeting of US customers.
Following the settlement, Binance has taken elaborate steps to enhance its compliance with US regulations. One key measure involves stricter Know Your Customer (KYC) procedures. Binance now requires prime brokers, who originally served as intermediary between institutional investor community and the exchange, to conduct more thorough KYC checks on their clients. This would include a collection of comprehensive information such as office addresses, locations of employees and founders, and signed attestations that verify the accuracy of the information.
The goal of these stricter KYC procedures is to ensure that US users are unable to access the platform through prime brokers. Binance maintains that it is highly committed to compliance and transparency. By publicly disclosing its standards for assessing users, they are striving to provide clarity for firms that are looking for access to their vast liquidity pool.
Impact of US Crackdown on Binance
The crackdown on US access has significantly impacted Binance. Following the guilty plea and ensuing enforcement action, Binance’s US arm was forced to downsize significantly due to declining revenue. In addition, former CEOs CZ Zhao stepped down as part of the plea deal, while Richard Teng has taken over to rebuild the exchange’s reputation and market share, particularly in the US.
Despite these challenges, Binance maintains its position as the top cryptocurrency exchange globally. However, the future of US user access to Binance remains rather uncertain. As Binance navigates the complex regulatory landscape, it will be interesting to see how it adapts its approach to comply with US regulations while still serving its global audience.
