* CZ, Binance’s CEO, provides clarifications on Binance’s association with CommEX.
* Cryptocurrency transfers between the platforms are in progress.
* Binance’s broader compliance strategy leads to its Russian operations’ sale to CommEX.
CZ’s Clarifications on Binance and CommEx Association
In a recent tweet, Changpeng Zhao (CZ), CEO of Binance, provided insights into the nature of the relationship between Binance and CommEX. He highlighted several key points:
Cryptocurrency transfers are underway between Binance and CommEX as users shift platforms. Older transactions were noted during the testing phase of the integrations.
Some ex-Binance CIS team members may have already joined CommEX, and others might follow. CZ regards this as a positive move.
CommEx’s design, APIs, and other interfaces align closely with Binance’s, a request made by Binance to ensure a seamless user transition.
CommEX will not cater to users from the US or the EU due to IP and KYC restrictions, a condition Binance stipulated.
Refuting speculations, CZ stated he does not hold an Ultimate Beneficial Owner (UBO) position in CommEX nor owns any shares. The deal excludes any buyback options.
Binance’s Decision Amid Regulatory Challenges
Binance, the world’s leading cryptocurrency exchange, has announced the sale of its entire Russia-based operations to CommEX. This significant strategic decision aligns with Binance’s emphasis on compliance and regulatory adherence across the numerous countries it operates within.
While Russia is ramping up regulations on crypto exchanges, Binance has also been under U.S. scrutiny for potential sanctions violations concerning Russia. On May 6, 2023, the U.S. Department of Justice initiated an inquiry into Binance, focusing on potential U.S. sanctions violations. This move was not isolated, with previous probes in 2021 and early 2022.
Earlier, in April 25, 2023, Binance discreetly lifted certain restrictions on Russian users that were initially imposed in March 2022, following EU’s sanctions on Russia. By April 2023, changes were made to allow deposits in Russian rubles and other currencies.
The EU’s extension of its sanctions impacted Russian users’ access to EU-registered crypto services. This shift led platforms like LocalBitcoins, Crypto.com, and Blockchain.com to cut ties with Russian clients.
To ensure a smooth transition, Binance and CommEX devised a systematic migration process for users and assets, assuring Binance’s existing Russian users of the security of their assets. The transition is expected to span a year, with some new registrations being redirected to CommEX.
While financial details remain undisclosed, Binance confirmed there would be no continued revenue from the sale and marked a complete exit from the Russian market.
Binance, though departing from Russia, remains bullish about the Web3 sector’s global potential and plans to focus on the 100+ other countries in its operation portfolio.
Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.
He Yi’s public letter provides insights into Binance’s stringent compliance measures like KYC, EDD, WCK, and POA.
Binance is under investigation by the U.S. Department of Justice’s national security division as of May 6, 2023, adding to a series of SEC charges.
Binance sells its Russian operations to CommEX, citing alignment with the company’s global compliance strategy.
In a crucial public letter that gains significance against the backdrop of global regulatory challenges, He Yi, Co-founder of Binance, outlined the company’s approach to compliance, competition, and internal efficiency. Yi explicitly mentioned the rigorous compliance measures like KYC, EDD, WCK, and POA that Binance follows. “It is important to note that many of our competitors do not need to consider KYC, compliance, EDD, WCK, POA as strictly as we do at Binance,” she stated.
Yi’s call for logical reasoning among employees seems to be a response to the multiple regulatory pressures the company is facing, particularly from the U.S. Department of Justice and the Securities and Exchange Commission (SEC).
On May 6, 2023, the U.S. Department of Justice’s national security division initiated an inquiry into Binance. This inquiry is focused on whether Binance allowed Russian customers to access its platform in violation of U.S. sanctions imposed in response to Russia’s invasion of Ukraine.
This investigation is not an isolated incident; it adds to a 2021 joint probe by the Department of Justice and the Internal Revenue Service, and an ongoing SEC investigation that filed 13 charges against Binance and its founder, Changpeng Zhao, on June 5, 2023.
Amidst these complexities, Binance recently announced that it would sell its entire Russian operations to CommEX. Noah Perlman, Binance’s Chief Compliance Officer, cited compliance strategy as the reason for this exit. “As we look toward the future, we recognize that operating in Russia is not compatible with Binance’s compliance strategy,” Perlman mentioned. This strategic move is expected to take up to a year to fully transition existing Russian users to CommEX.
He Yi’s letter provides a lens to understand Binance’s strategic moves in navigating its global regulatory challenges. Her emphasis on strict compliance measures and logical decision-making among employees appears to be a part of a larger strategy to bolster the company’s standing amidst ongoing investigations and market exits.
Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.
FTX Exchange has launched a Customer Claims Portal to facilitate the filing of proof of claims by its customers. The detailed guide, available on the FTX support page, outlines the process for customers to submit their Know Your Customer (KYC) information, access historical account data, and file a proof of claim if necessary.
Key Details
Deadline for Filing Claims: Customers must file their proof of claim by September 29, 2023, at 4 pm ET.
KYC Information Required: All customers are required to provide KYC information, including details such as name, birth date, government identification, and address. This process will be conducted securely through a third-party partner.
Account Balances and Transaction History: Customers can view their account balances and transaction history as of November 11, 2022.
Confirmation of Balances: Customers can agree or disagree with their account balance as of November 11, 2022, and take further action if needed.
Steps to File a Claim
1. Login: Customers must log in to the Customer Claims Portal using their FTX account credentials and verify their email.
2. Provide KYC Information: Customers must complete the KYC process, providing necessary identification details.
3. Review Account Balances: Customers can view their account balances and transaction history.
4. Confirmation of Balances: Customers can confirm their balances and file a proof of claim if they disagree with the displayed balance.
Additional Notes
KYC information submission is not required to view account balance or file a proof of claim, but the Debtors reserve the right to object to claims not verified with KYC information.
Customers who signed up using the FTX App on or before February 19, 2022, should select the applicable platform during the login process.
Assistance for account login issues and information changes is available on the FTX support page.
The creation of the Customer Claims Portal is a significant step for FTX Exchange in managing customer claims. The detailed guide ensures that customers have a clear understanding of the process and the necessary steps to take. The deadline for filing a proof of claim is fast approaching, and customers are encouraged to review the guide and take appropriate action.
A recent upgrade has made it possible for users of the noncustodial multichain crypto wallet offered by Neobank Cogni to have access to a previously unavailable feature. Users of the wallet that the bank provides will soon be able to receive soulbound nonfungible tokens (NFTs) that incorporate information from the Know Your Customer (KYC) protocol. The NFTs, which will be constructed on the Polygon network, will provide customers the chance to convert their “Web2” KYC verification, which was performed by the bank when the client established their account, to a Web3 setting. This will be made possible via the Polygon network.
The cryptocurrency wallet that was introduced by Cogni in January allows users to send, receive, and store cryptocurrencies as well as NFTs. These capabilities were first made available to users. Users of wallets will now have the option to mint non-transferable soulbound NFTs, which can only be decrypted by decentralized apps (DApps) with the owner’s explicit authorization. Wallet users will be able to do this by using their private keys.
According to Ganesh Ravishankar, the Chief Executive Officer of Cogni, the user experience and a lack of faith in the ecosystem are the reasons why a lot of people have not jumped on the decentralization bandwagon just yet. This data was provided by the Chief Executive Officer of Cogni. The information about bank-level KYC that is contained on the NFT, on the other hand, satisfies the KYC rules in the United States, and it will be made available to cooperating DApps without the need for any further action on the part of those DApps.
Cogni’s mission is to provide a marketplace for decentralized apps (DApps) that can be connected to with just a few clicks, and this will include the KYC verification procedure. The use of wallets that do not contain custodial services has been on the rise, especially in light of the failure of large cryptocurrency organizations to escape bankruptcy during the crypto winter. This failure led to the money of customers being frozen in custodial wallets, which resulted in the increased popularity of wallets that do not include custodial services.
It is planned that sometime over the summer, the Cogni soulbound NFT will be made available to the general public. Initially, however, it will only be accessible to a select group of users. The objective of the firm is to improve the user experience of decentralized finance (DeFi) by creating a platform that is easy to use, has security on par with that of banks, and validates the identities of users.
Decentralized finance (DeFi) has experienced tremendous growth in recent years, with its total value locked (TVL) surpassing $100 billion in August 2021. However, the lack of regulation and the prevalence of cyber attacks pose significant challenges for the industry. One of the most pressing issues in DeFi is the laundering of millions of dollars stolen from DeFi platforms into clean money. To combat this, DeFi executives at the World of Web3 (WOW) Summit in Hong Kong have argued that implementing Know Your Customer (KYC) measures can address the problem.
During a panel session titled “Blockchain Security to Smart Compliance: AML & KYC Solutions in DeFi,” industry leaders endorsed KYC as a solution to tackle Anti-Money Laundering (AML) issues. Dyma Budorin, the CEO of smart contract auditing firm Hacken, warned of the prevalence of tools readily available to hackers to “launder the money.” He described it as the “biggest issue” in the industry, where hackers can easily steal millions of dollars and launder the funds into various wallets, making it difficult to track the source of the funds. Therefore, he believes KYC is about transparency and accountability, and it should be part of the industry.
However, Victor Yim, the head of fintech at Hong Kong’s incubator for entrepreneurship, Cyberport, suggested that KYC alone would not solve all AML problems. He explained that even in traditional finance, where KYC measures are prominent, “there is still money laundering happening every day.” Despite this, Yim believes KYC measures can make a “better tomorrow” for the DeFi industry. He added that it would require a collective effort, including regulators, policy bureau, and other players, to execute successfully. He cited the concept of “anonymous traceable” as an example of a balance between anonymity and compliance, where individuals remain anonymous unless called upon by law enforcement, adding that it will “protect the good people while still getting the bad people.”
Alexander Scheer, the founder of zkMe, emphasized that different mechanisms should be used for different solutions. For example, crypto mixers need to be handled differently from DeFi front-ends and on- and off-ramps. Scheer also touched on regulations, stating that the DeFi industry should proactively take the lead and “front run” regulations before they are imposed by regulators. This proactive approach could help to ensure that regulations do not stifle innovation in the industry.
In conclusion, implementing KYC measures in DeFi could enhance transparency and accountability in the industry, making it more difficult for hackers to launder stolen funds. However, it is crucial to acknowledge that KYC alone is not a panacea for AML issues, and different mechanisms should be used for different solutions. The DeFi industry should collaborate with regulators and other stakeholders to develop effective solutions that balance compliance with innovation, safeguarding the interests of all stakeholders, and preventing bad actors from exploiting the system.
A blockchain security company by the name of CertiK discovered the startling revelation that persons who commit bitcoin fraud have access to a “cheap and easy” black market of individuals who are willing to put their name and face on fraudulent projects for the modest price of $8. The identities of these KYC players might also be used by criminals to register bank accounts or exchange accounts in their own names, which is another possibility.
Researchers from CertiK discovered over 20 underground marketplaces that hire KYC actors for as little as $8 for basic “gigs.” These “gigs” include meeting the KYC criteria “to open a bank or exchange account from a developing country.” You may access these marketplaces via Telegram, Discord, smartphone applications, and websites that specialize in gigs.
CertiK made the observation that the majority of performers appear to be exploited because they live in developing countries “with an above-average concentration in South-East Asia” and are paid between $20 and $30 for each role that they play. Additionally, CertiK noted that the majority of these performers live in South-East Asia.
CertiK has issued a warning that more than 40 websites that claim to analyze cryptocurrency projects and award “KYC badges” are “useless” due to the fact that their services are “too superficial to detect fraud or simply too amateurish to detect insider threats.” CertiK believes that this is the case because the websites are “too superficial to detect fraud or simply too amateurish to detect insider threats.”
In October, Mastercard made the announcement that it will be launching a new solution for the identification and prevention of fraud. This new solution takes use of both artificial intelligence and the data stored on blockchains.
There is a widespread misunderstanding that the transparent nature of blockchain transactions makes it simpler for criminals to conceal the flow of money. This is not the case. On the other hand, the opposite is really the case.
The French law enforcement agency was able to identify five individuals and bring them to justice for stealing nonfungible tokens (NFT) via a phishing scam. This was made possible by the use of on-chain analysis.
Nonfungible tokens (NFTs) are constantly in the news. NFT platforms are springing up like mushrooms and champions are emerging, such as OpenSea. It is a real platform economy that is emerging, like those in which YouTube or Booking.com gained a foothold. But it is a very young economy — one that is struggling to understand the legal issues that apply to it.
Regulators are starting to take an interest in the subject, and there is risk of a backlash if the industry does not regulate itself quickly. And, as always, the first blows are expected east of the Atlantic.
In this first article devoted to the legal framework of NFTs, we will focus on the application of the digital asset regime and financial law to NFTs in France. In a second article, we will come back to the issues of liability and copyright.
Related:Nonfungible tokens from a legal perspective
A digital asset?
In France, the definition of digital assets includes two types of tokens. On the one hand are utility tokens, i.e., all intangible assets representing, in digital form, one or more rights, which can be issued, recorded, stored or transferred by means of a shared electronic recording device allowing the owner of the asset in question to be identified, directly or indirectly.
NFTs are intangible assets that can be issued, recorded, retained or transferred through shared electronic records.
On the other hand are payment tokens, i.e., any digital representation of value that is not issued or guaranteed by a central bank or public authority, is not necessarily linked to a legal tender, and does not have the legal status of money, but is accepted by natural and legal persons as a medium of exchange that can be transferred, stored or exchanged electronically.
Is an NFT a digital asset under French law?
An NFT is acquired to obtain a property right, but it can also be acquired to claim the performance of one or more services related to that NFT.
Furthermore, an NFT can be seen as a digital representation of value that is not issued or guaranteed by a central bank or public authority, that is not necessarily linked to a legal tender and does not have the legal status of money, and that can be stored or exchanged by electronic means. It follows that NFTs could be classified as digital assets, either as a token of use, a token of payment, or both.
The consequence of classifying NFTs as digital assets would be twofold.
Registration as a virtual asset service provider
If the platform issuing NFTs implements, in addition to its primary market, a secondary market on which users would benefit from: 1) a digital asset storage service or access to digital assets for the benefit of a third party in order to hold, store or transfer these digital assets, and/or 2) a service of purchase or sale of digital assets in legal tender, and/or 3) a service of exchange of digital assets for other digital assets, and/or 4) the operation of a platform of trading of digital assets, then a compulsory registration as a digital asset service provider with France’s financial regulator, the Autorité des Marchés Financiers (AMF), is required.
In addition, clients must be identified through a Know Your Customer. Our analysis is supported by the fact that NFTs are referred to as “crypto-assets” by the proposed European regulation, “Markets in Crypto-assets” (MiCA).
Related:How should DeFi be regulated? A European approach to decentralization
The Financial Action Task Force (FATF) has also issued an opinion on the assimilation of NFTs into “digital assets” in its famous recommendation of October 2021. It states that NFTs are “generally not considered [virtual assets].”
However, like its approach to DeFi, FATF emphasizes that regulators should “consider the nature of the NFT and its function in practice, not the terminology or marketing terms used.” In particular, FATF argues that NFTs that “are used for payment or investment purposes” can be virtual assets.
Although the directive does not define “for investment purposes,” FATF likely intends to capture those who purchase NFTs with the intent to resell them later for a profit. While many buyers purchase NFTs because of their connection to the artist or work, a large portion of the industry buys them because of their potential to increase in value. In other words, many NFTs could qualify as digital assets to follow this interpretation.
Application of the ICO regime?
As soon as there is a public offering of digital assets (to more than 150 potential buyers) in France, the French ICO regime applies. The issuer is then subject to the following rules: The “simple” advertising of the token offering is allowed, but any canvassing would be prohibited as well as any “quasi canvassing,” except if the issuer has obtained the AMF visa.
This is a delicate point here because the NFT issuer could not “invite” French residents to register on its site without violating the law. It would then be required to never target “French” groups or communities.
However, we do not believe that the ICO regime is applicable to NFTs, because this regime is designed to regulate a fundraising operation and protect the investor. Certain provisions of the law are incompatible with an NFT offer (i.e., offer limited to 6 months, sequestration of funds during the ICO, etc.).
This is the spirit of the proposed MiCA regulation, which considers NFTs as digital assets by default, but excludes them from certain obligations specific to ICOs (publication and notification of a white paper).
Anti-money laundering obligations and KYC?
We have already noted the risk of qualifying as a virtual asset service provider (VASP), which would entail a KYC obligation (from 1 euro of transaction). In addition, persons acting as intermediaries in the art trade, including when it is carried out by art galleries, when the value of the transaction is equal to or greater than 10,000 euros, are subject to an obligation to apply due diligence measures based on the assessment of the risks presented by their activities in terms of money laundering and terrorist financing.
Related:NFTs and compliance: Why we need to be having this conversation
In short, all NFT platforms, which are linked to digital works of art, should implement KYC procedures even if they do not qualify as digital assets, which today is far from being the case.
In the United States?
We know that the approach in the United States is different than in Europe because the U.S. Securities and Exchange Commission (by applying the famous “Howey Test”) qualifies tokens that would be seen as digital assets in Europe, as securities.
The risk of the SEC classifying tokens as “securities” is therefore significant. The SEC has not yet come to a firm conclusion on the issue, but there have already been suggestions that some NFTs could be qualified as securities, especially when they are sold in a fractional manner.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Thibault Verbiest, an attorney in Paris and Brussels since 1993, is a partner with Metalaw, where he heads the department dedicated to fintech, digital banking and crypto finance. He is the co-author of several books, including the first book on blockchain in French. He acts as an expert with the European Blockchain Observatory and Forum and the World Bank. Thibault is also an entrepreneur, as he co-founded CopyrightCoins and Parabolic Digital. In 2020, he became chairman of the IOUR Foundation, a public utility foundation aimed at promoting the adoption of a new internet, merging TCP/IP and blockchain.
As the Department of the Treasury has announced its regulatory agenda for the fiscal year earlier today, many in the web3 space have likely experienced flashbacks to December 2020, when the agency had first proposed to impose know your customer, or KYC, rules on transactions that involve self-custodied crypto wallets.
The Treasury’s semiannual agenda and regulatory plan, a document that is meant to inform the public of the department’s ongoing rulemaking activities includes and encourage public feedback, features a clause entitled “Requirements for certain transactions involving convertible virtual currency or digital assets.”
Ascribed to the Treasury’s Financial Crimes Enforcement Network, or FinCEN, it proposes to require banks and money service businesses to “submit reports, keep records, and verify the identity of customers” in relation to transactions with funds held in unhosted wallets.
In FinCEN parlance, unhosted (also known as self-hosted) wallets are those that are not controlled by an intermediary financial institution or service. Users of such wallets “interact with a virtual currency system directly and have independent control over the transmission of the value.”
The rule proposed in Dec. 2020 would have required registered cryptocurrency exchanges to collect personal details of their customers transacting with an unhosted wallet if the value of the transaction exceeded $3,000. A person sending funds from an exchange account to their private wallet would fall within the scope of the rule.
Introduced in the waning days of Secretary Steven Mnuchin’s office, the rule was scrapped amid massive pushback from the industry.
At the time, Mnuchin said that the rule addressed “substantial national security concerns” associated with the cryptocurrency market. The resurgence of the agency’s focus on self-hosted wallets measure could have to do with the “crypto as a national security threat” focus of the executive order that the Biden administration is reportedly preparing.
Still, mentioning a rule on the Treasury’s semiannual agenda does not mean that it will necessarily be adopted.
Top crypto exchange Binance is reportedly maintaining weak know-your-customer (KYC) compliance standards despite warnings from senior figures at the company, according to Reuters.
In a new special report, the news service breaks down the exchange’s alleged regulatory shiftiness, zeroing in Binance’s “weak” KYC checks, which are designed to prevent money laundering.
The article, based on “dozens of interviews with former senior employees of Binance, advisers and business partners,” as well hundreds of documents, also alleges that Binance has evaded questions about where its main online exchange is based.
In July, Binance CEO Changpeng Zhao said he had decided to move Binance away from its decentralized setup in an effort to appease regulators and win licensing approval amid crackdowns in several jurisdictions, including the US, Hong Kong, Japan and Singapore. The company has reportedly expressed some interest in Ireland, though to what degree remains unclear.
An internal company document indicates that Binance also didn’t take recommendations from its own compliance department and continued to recruit customers in Russia, Ukraine and five other countries deemed to be subject to “extreme” money-laundering risk, Reuters reports.
Binance didn’t respond to detailed questions from Reuters, but the exchange did provide the following quote:
“As the leading cryptocurrency and blockchain ecosystem, we are both leading and investing in the future technologies and legislation that will set the crypto industry on the road to becoming a well-regulated, secure industry.”
A Binance spokesperson also claimed Reuters’ information was “wildly outdated and – in several places – flatly incorrect,” but the spokesperson didn’t go into details.
Changpeng Zhao says on Twitter,
“FUD [Fear, uncertainty, doubt]. Journalists talking to people who were let go from Binance and partners that didn’t work out trying to smear us.
We are focused on anti-money laundering, transparent and welcome regulation. Action speaks louder than words. Thank you for your unwavering support!”
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