Binance, the world’s largest cryptocurrency exchange, expects to pay fines to settle existing U.S. regulatory and law enforcement investigations of its company, the company’s chief strategy officer said in an interview.
Binance grew rapidly and started out as a company driven by software engineers unfamiliar with laws and regulations written to address the risk of bribery and corruption, money laundering and economic sanctions, said Patrick Hillmann. The company has been working to fill gaps in its early compliance efforts, he said, but still expects regulators to issue fines for past behavior.
The company “is working with regulators to figure out what remedial actions we need to take now to make up for that,” Mr Hillmann said on Wednesday. The outcome will be “probably a fine, could be more… We just don’t know. That is for regulators to decide.”
Binance is one of many major exchanges under scrutiny in the US for their crypto offerings. The exchange, which has no global headquarters, started operations in 2017 in China. The executive team, including founder and Chief Executive Changpeng Zhao, spent time in Japan after China banned crypto exchanges. Binance is not available to US traders today, Mr Hillmann said.
Regulatory threats have weighed on crypto prices in recent weeks, although crypto stock and currency prices rose at the same time on Wednesday.
The Justice Department has been investigating Binance for possible violations of US anti-money laundering laws, according to people familiar with the matter. The Commodity Futures Trading Commission investigated whether Binance was offering cryptocurrency derivatives to US customers without properly registering that activity with the CFTC, the people said.
Mr Hillmann said he could not estimate the size of the fines or when Binance might reach a resolution with US authorities, but said the exchange is “very confident and feels good about where those discussions are going.”
“It will be a good time for our business because it allows us to put it behind us,” said Mr. Hillmann.
Mr Hillmann said it was still a “very confusing time for us” to understand how US regulators want to oversee the crypto market. The Securities and Exchange Commission has stepped up its own enforcement in recent months, closing access to products and services central to the digital currency business.
Kraken, one of the largest US exchanges, last week agreed to pay $30 million in fines to the SEC to resolve a civil investigation into its staking investment program. Kraken, which neither admitted nor denied wrongdoing, agreed to stop offering staking to US users. Staking allows investors to earn a yield by temporarily transferring their crypto tokens to a broker or cryptocurrency network.
The SEC has named Paxos Trust Co. told regulators plan to take enforcement action against Paxos over its issuance of BUSD, a stablecoin called Binance, The Wall Street Journal reported this week. Paxos issues BUSD but allows the use of Binance’s nickname, which gives the coin the “B” in its name.
On Monday, New York regulators shut down new issuance of BUSD, which state regulators had previously allowed to be issued and dubbed a virtual currency. Paxos has said it disagrees with the SEC staff’s analysis of BUSD and plans to litigate if the federal agency charges the company with violating investor protection laws.
Mr. Hillmann said the SEC’s most recent enforcement activity “would have a really deep and long-lasting chilling effect in the United States.”
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