According to Bloomberg, government officials are digging into possible money laundering and tax infractions. The report cited individuals with knowledge of the matter.
A Binance representative, Jessica Jung, issued the following statement:
“We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion. We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity.”
Binance is far larger than the competition. The most recent trading 24-hour trading volume indicated over $80 billion in transactions with its nearest competitor generating less than half that amount.
Founded by CEO Changpeng “CZ” Zhao in 2017, the crypto exchange was originally based in China but has since exited the country. According to the aforementioned report, Binance is incorporated in Cayman but lacks a single corporate headquarters. Binance.US is a US-based exchange that is affiliated with the parent company that was created solely to target the US market.
Bloomberg cites information from Chainalysis that indicates funds affiliated with illicit activities went through Binance more than any other exchange.
Recent rules require that crypto exchanges to maintain both buyer and seller information for possible scrutiny by regulators. It is not certain how rigorous Binance is in complying with these demands but in the early days of crypto KYC and AML restrictions were fairly lax.
Recently, SEC Chairman Gary Gensler stated that crypto exchanges needed additional regulation regarding investor protection. The possible investigation of Binance, along with a regulatory transition with the Biden Administration, may foreshadow additional scrutiny for the entire crypto exchange sector.