Texts and Documents Reveal Crypto Exchange Binance Planned At Avoiding U.S. Regulatory Scrutiny

The latest report from Wall Street Journal (WSJ) shows that cryptocurrency exchange Binance has once developed a plan to avoid the regulatory scrutiny and prosecution by the U.S. authorities.

This was the time back in 2019 when crypto exchange Binance started its American entity Binance.US. Back then, the crypto exchange operated majorly from servers based in China and Japan.

However, 20% of its customers were in the United States where the authorities had singled an impending crackdown on the unregulated players in the crypto space. In a private chat seen by WSJ, a Binance executive warned colleagues that any lawsuits from US regulators would be like “nuclear fall out” for Binance’s business.

Fearing the threat of prosecution, Binance set out a plan of neutralising US authorities from 2018 to 2020, as per the texts and documents accessed by the Wall Street Journal. The strategy involved building a dedicated American platform Binance.US, which would license Binance’s technology and brand but otherwise would appear wholly independent of Binance.com. This would shield the global exchange from US regulator’s scrutiny while keeping the American users separate.

However, the bigger question today is that to what degree are Binance.com and Binance.US connected to each other’s. Citing the internal texts and documents, WSJ reported: “Binance and Binance.US have been much more intertwined than the companies have disclosed, mixing staff and finances and sharing an affiliated entity that bought and sold cryptocurrencies. Binance developers in China maintained the software code supporting Binance.US users’ digital wallets, potentially giving Binance access to U.S. customer data”.

In the case that US regulators conclude that these links mean that Binance can have control over the US company, they might even consider policing Binance’s entire business.

Commenting on the development, a Binance spokesperson told Reuters: "we have already acknowledged that we did not have adequate compliance and controls in place during those early years...we are a very different company today when it comes to compliance.”

The same report from WSJ also notes that Binance was considering to hire Gary Gensler before his appointment as the chief of the U.S. Securities and Exchange Commission (SEC). Back in 2018, Gary Gensler conducted meetings with former Binance venture arm head Ella Zhang, and Harry Zhou. Zhou wrote: “I observe that while Gensler declined advisor-ship, he was generous in sharing license strategies”.