The CFTC complaint contains an ‘incomplete statement of facts’, and Binance disagrees with the characterization of many points. This statement was made by Changpeng Zhao, head of the cryptocurrency exchange.
My Response to the CFTC Complaint | Binance Blog https://tadyotM7HN
— CZ ? Binance (@cz_binance) March 27, 2023
According to him, the company has cooperated with the regulator for more than two years, so the filed complaint is ‘unexpected and disappointing’.
Zhao said the mechanism Binance developed to ensure compliance was ‘the best in its class’. The head of the company cited the existence of a mandatory KYC program, the blocking of US users, cooperation with authorities, and a commitment to transparency.
«In our compliance team, there are more than 750 people, many of whom previously worked in law enforcement and regulatory agencies. To date we have processed more than 55,000 requests and helped freeze/arrest funds totaling more than $125 million in 2022 and $160 million in 2023», — Zhao wrote.
The top executive also mentioned licenses and registrations in various countries. He said the company does not trade to earn profits and does not manipulate the market.
«Binance ‘trades’ in a number of situations. Our revenues are denominated in cryptocurrency. We do occasionally need to convert them to cover expenses in fiat or other cryptocurrencies. We have subsidiaries that provide liquidity for less liquid pairs. These subsidiaries are specifically controlled so that they do not earn large profits», the statement says.
Zhao acknowledged that he has two accounts on the exchange: one for Binance Card and one for his own assets.
«I also need to occasionally convert cryptocurrency to pay for my personal expenses or to use the card», — added he.
According to the statement, the company maintains a 90-day trading ban for employees and restrictions on futures trading. Zhao stressed that the company will provide ‘comprehensive answers’ to the allegations at a later time.
On March 27, the CFTC filed a lawsuit against Binance and Zhao, accusing them of unregistered trading of derivatives, providing services to U.S. citizens and persons subject to sanctions, and failing to comply with anti-money-laundering rules.
The regulator sought penalties, injunctions, including a ban on conducting business in the country. Adam Kokran, a partner at Cinneamhain Ventures, described the suit as an attempt to deal a fatal blow to Binance and did not rule out that authorities ‘have a good chance of success.’
Meanwhile, in the suit, the regulator classified Bitcoin, Ethereum and Litecoin as ‘commodities’.
BTC: commodity
ETH: commodity
LTC: commodity
USDT: commodity
BUSD: commodity— the CFTC pic.twitter.com/Y3qi6vDmTA
— scott➕ (@scott_lew_is) March 27, 2023
The chief legal officer of Coinbase, Paul Grewal, criticized the lack of an agreement between the CFTC and SEC regarding the classification of digital assets:
«A security can apparently also be a commodity, except when it isn’t. And it depends on which regulator you ask and when. If you are confused, you are not alone. Is this really the best American law has to offer?»
A security can apparently also be a commodity, except when it’s not. And it depends on which regulator you ask, and when. If you’re confused, you are not alone. Is this really the best American law has to offer? https://t.co/uziI1J2tCi
— paulgrewal.eth (@iampaulgrewal) March 27, 2023
In March, members of the Senate Banking Committee sent Binance a letter requesting detailed information on KYC/AML policy. They accused the platform of ties to criminals, calling it a ‘haven for illicit financial activity’.
Zhao denied the allegations, and the company provided senators with a reply. However, he hardly touched on the financial aspect.