He Yi Discusses Binance’s Regulatory Strategy Amid Actions Against Binance and Zhao Changpen

Key Takeaways

  1. He Yi’s public letter provides insights into Binance’s stringent compliance measures like KYC, EDD, WCK, and POA.
  2. 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.
  3. 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.

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Breaking: Binance Sells Russian Operations to CommEX, Exits Market

Key Takeaways

  1. Binance to sell its entire Russia business to CommEX
  2. Off-boarding process for existing Russian users to take up to one year
  3. Binance cites compliance strategy as the reason for exit

Binance, the world’s largest cryptocurrency exchange, has announced that it will sell its entire Russia-based operations to CommEX. Noah Perlman, Binance’s Chief Compliance Officer, stated, “As we look toward the future, we recognize that operating in Russia is not compatible with Binance’s compliance strategy.” The move comes as part of Binance’s broader focus on compliance and regulatory adherence in over 100 other countries where it continues to operate.

While Russia is tightening regulations on crypto exchanges, the U.S. is simultaneously investigating Binance for potential violations of U.S. sanctions against Russia.

On May 6, 2023, the U.S. Department of Justice’s national security division initiated an inquiry into Binance. The investigation focused on whether the exchange allowed Russian customers to access its platform in violation of U.S. sanctions, which were imposed in response to Russia’s invasion of Ukraine. This inquiry was not an isolated incident; it followed a 2021 joint investigation by the Department of Justice and the Internal Revenue Service into the global exchange. Additionally, the U.S. Securities and Exchange Commission (SEC) has been probing Binance’s relationship with two firms owned by its founder, Changpeng Zhao, since early 2022.

Earlier this year, on April 25, 2023, Binance quietly lifted restrictions it had placed on Russian citizens and residents over a year ago. These restrictions were initially imposed in March 2022 after the European Union sanctioned Russia for its invasion of Ukraine. At that time, Binance had stopped supporting deposits from Visa and Mastercard cards issued in Russia. However, by April 2023, users were able to deposit Russian rubles and other currencies from bank cards issued in Russia. The exchange also lifted limits for accounts with balances larger than 10,000 euros for users in Russia.

The European Union had broadened its sanctions last year, making it impossible for Russian citizens and residents to use any crypto service registered in the EU. This led to immediate actions from other crypto platforms like LocalBitcoins, Crypto.com, and Blockchain.com, which notified Russian users that their accounts would soon be discontinued.

To facilitate a seamless transition, Binance and CommEX have outlined an orderly process for the migration of users and their assets. Existing Russian users have been assured that their assets are secure and will be protected throughout the transition period, which is expected to last up to one year. A portion of new user registrations from Russia will be immediately redirected to CommEX, scaling up over time.

While the financial terms of the deal remain undisclosed, it is noteworthy that Binance will not have any ongoing revenue split from the sale. Additionally, the company does not retain any option to buy back shares in the business, marking a complete exit from the Russian market.

Although exiting Russia, Binance remains optimistic about the growth prospects of the Web3 industry globally. The company plans to “focus our energy on the 100+ other countries in which we operate,” according to Perlman.

These regulatory pressures and policy shifts provide a broader context for understanding Binance’s decision to exit the Russian market. The sale to CommEX can be seen as a strategic move by Binance to navigate a complex and evolving regulatory landscape, both in Russia and globally.

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.

Image source: Shutterstock


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Sberbank Executive Touts Blockchain for Russia

An official at Russia’s biggest bank, Sberbank, has proposed that the use of blockchain technology is the direction in which the nation should go in order to overcome the present settlement challenges it is facing. Alexander Vedyakhin, who serves as the first deputy chairman of Sberbank, is of the opinion that blockchain technology has developed considerably over the past few years and now provides new capabilities. These new capabilities may make it possible for Russia to develop payment systems that are more effective.

At the conference, Vedyakhin stressed the significance of blockchain technology in resolving Russia’s current settlement challenges. He said that the technology offers the possibility of a road to payment systems that are more effective. In addition to this, he pointed out that the technology has advanced substantially over the last few years, which has resulted in the creation of brand new avenues for its use.

The statements made by Vedyakhin come at a time when Russia is investigating a variety of options to upgrade its financial infrastructure and lessen its dependence on conventional banking systems. The blockchain technology, which is both decentralized and transparent in nature, may play a significant part in the accomplishment of these objectives.

The Russian government has previously indicated that it is interested in the creation of blockchain technology as well as its implementation. In the year 2020, Russia passed a legislation that regulated digital financial assets. This law established a regulatory framework for the usage of cryptocurrencies and other forms of digital assets across the nation. In addition, the Russian Central Bank has been doing extensive study into the feasibility of issuing a digital ruble, also known as a central bank digital currency (CBDC), which has the potential to enhance the effectiveness as well as the safety of the country’s various payment systems.

The fact that Russia’s biggest bank, Sberbank, has signaled its support for blockchain technology lends more credence to the idea that the technology might fundamentally alter the nature of the financial system in Russia. It is probable that blockchain technology will continue to see more acceptance as more financial institutions and governments throughout the globe understand the advantages of the technology. This will result in the creation of new possibilities for innovation as well as increased financial efficiency.


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Russian Crypto Advocates Urge Putin to Address Delayed Regulations

The adoption of rules for the cryptocurrency business in Russia has been notoriously slow. As a result, the Russian Association of Crypto Industry and Blockchain (RACIB) has taken the initiative to persuade President Vladimir Putin to reform the way the government approaches regulating the market. Despite enforcing its first crypto law in 2021, the RACIB argued that Russia has been too slow to implement experimental legal regimes targeting crypto adoption. This argument was presented in the form of an open letter. In the letter, the RACIB emphasized the risks of ignoring the global development of the cryptocurrency industry.

The Australian Cryptocurrency and Investment Business (RACIB) has voiced its concern regarding a number of proposed legal amendments to the existing crypto law. These amendments include the establishment of a “national cryptocurrency exchange” and the introduction of criminal sanctions for local blockchain developers. The association pointed out that these amendments would significantly complicate the implementation of digital financial technologies in Russia, making it difficult for companies in the digital asset industry to prove that they are operating within the framework of Russian legislation. In other words, the amendments would make it more difficult for businesses to demonstrate that they are complying with Russian law.

The delayed laws have introduced an element of uncertainty into the cryptocurrency business in Russia, leading supporters of the industry, such as the RACIB, to urge the government to take a more aggressive stance. As the demand for cryptocurrencies continues to develop on a worldwide scale, a growing number of nations have begun to acknowledge this trend and pass legislation designed to safeguard investors and standardize the sector. It is still unknown if Russia will follow suit and move toward a more progressive approach to the regulation of the cryptocurrency business in the near or distant future.


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A British National Charged With Aiding North Korea in Violating US sanctions

A citizen of the United Kingdom who was wanted by the Department of Justice in the United States was apprehended by the Interpol office in Moscow (DoJ). The guy is suspected of participating in a plot to circumvent the restrictions imposed by the United States on North Korea.

Christopher Emms was taken into custody on February 21 in Moscow on the basis of a “red alert” issued by Interpol, as reported by the local media. The British national, who was 31 years old, was taken into custody at the hostel where he was sleeping.

In April 2022, it is believed that Emms, together with a citizen of Spain named Alejandro Cao De Benos, supplied North Korea with instructions on how it might utilize blockchain technology and cryptocurrencies to escape sanctions and wash dirty money. The 2019 Pyongyang Blockchain and Cryptocurrency Conference was both planned and coordinated by the two individuals.

Virgil Griffith, a person who once worked on the Ethereum project, is the third person involved in the plot. In November of 2019, he was taken into custody by the Federal Bureau of Investigation, and after entering a guilty plea, he was given a sentence of 63 months in jail. If found guilty on one count of conspiring to violate the International Emergency Economic Powers Act, Emms faces a possible maximum sentence of 20 years in jail.

Previously, Radha Stirling, the founder of Due Process International, which is a nongovernmental organization that helps defend human rights in the face of international enforcement agencies, stated that there was no strong evidence against Emms: “Precisely because he did nothing wrong; he provided no information to North Korea that doesn’t already appear on the first page of Google.”

After an eight-month travel restriction, Emms was finally free to leave Saudi Arabia in September 2022, after Saudi Arabia had rejected the American extradition request on the grounds that it had a legal foundation. He didn’t waste any time getting out of the country and went straight to Russia. However, despite the fact that the nation was the focus of the Department of Justice’s attempts to implement financial sanctions in the cryptocurrency industry, the local authorities made the decision to assist their American colleagues.


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Bank of Russia to Debut Digital Ruble in April 2023

The first consumer pilot for the nation’s central bank digital currency (CBDC) will be rolled out by the Bank of Russia on April 1, 2023, as part of preparations for this day.

According to the first deputy governor Olga Skorobogatova, the Russian Central Bank is getting ready to launch the first real-world digital ruble transactions very soon. These transactions will include 13 local banks and many retailers.

According to a report by the regional news agency TASS, the official said that the future CBDC pilot would include genuine activities and real consumers in Russia, but that it will be restricted to a set amount of transactions and clients.

At the Ural Forum on Cybersecurity in Finance, Skorobogatova said that “We expect to begin the digital ruble project on April 1 with transactions including individual transfers as well as payments in trade and service organizations.” She went on to say that the financial institutions who were taking part in the pilot program had technically shown that they were prepared to begin testing the digital ruble.

The deputy governor provided clarification that regular consumers would not be allowed to participate in the pilot in the first stage, since banks would begin the pilot with clients who have been picked in advance. According to what Skorobogatova said, when the first stage of the pilot program is completed, the Bank of Russia intends to evaluate how to further grow the digital ruble.

The most recent declaration made by Skorobogatova is in line with the implementation strategy for the digital ruble that was publicly presented by the central bank in June of 2022. Because of Western economic sanctions against Russia, the consumer CBDC pilot was pushed up to a date that was originally planned for 2024 but was brought up to a date that was earlier because the Russian central bank was seeking for an alternative to the SWIFT payments system.

This information comes at a time when some Russian authorities are stating that the Bank of Russia is examining the possibility of a gold-backed coin that would target international commerce. Vladimir Chistyukhin, the first deputy governor of the Bank of Russia, is of the opinion that the creation of a “golden token” would assist Russia in the development of a new investment product that is appealing to investors and a payment mechanism that is required for international settlement.


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Russia Gives Tax Incentives to Crypto Miners

In the most recent months, the cryptocurrency mining business has been met with moratoriums in several regions of the United States and Canada. Those who wish to invest in cryptocurrency mining may now take advantage of tax benefits offered by Russia. The new crypto mining facility in east Siberia, which will cost $12 million and get direct backing from the government, will open soon.

Buryatia is a republic located in east Siberia and is a part of the Russian Federation. According to the local media, the Corporation for the Development of the Far East, which is controlled by the state, has announced the start of the cryptocurrency mining facility in Buryatia.

The plant will have 30,000 mining equipment, will employ one hundred people, and will use one hundred megawatts of electricity from the local power system. It is going to open in the first half of 2023 and will be owned and operated by BitRiver, which is the leading provider of cryptocurrency mining colocation services in Russia.

The mining center will be eligible for a wide range of benefits, including exemption from land and property taxes as well as a reduction in the income tax rate. For the mine operator, there will be a fifty percent decrease in the cost of the power.

The legal position of Buryatia, which is that of a “territory of advanced development” — a special economic zone that is encouraged to attract national and international investments — might provide an explanation for the help that the government is providing. It is the mission of the Corporation for the Development of the Far East, a wholly owned subsidiary of the Ministry for the Development of the Far East and Arctics, to provide financial backing for various investment endeavors.

Since the beginning of war in Ukraine and the financial sanctions that followed it, the Russian government has altered its anti-cryptocurrency posture, especially with regard to mining. This change came about as a result of the conflict in Ukraine. Gazprom Neft, a state-owned gas company, and BitRiver entered into a cooperation in July 2022 so that Gazprom Neft could provide BitRiver with power produced from petroleum gas. As part of the collaborative effort, BitRiver has begun creating a digital infrastructure in the oil fields where Gazprom supplies flare gas for cryptocurrency mining operations. These fields are located in Russia.


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Gazprombank suggests banks be given more time to adjust to digital

Gazprombank, which is an unit of the main Russian government-owned gas business, Gazprom, has openly recommended that banks be given extra time before the implementation of the digital currency. Because of international financial restrictions and rising geopolitical tensions, progress on the country’s central bank digital currency (CBDC) initiative has picked up speed.

As was reported by local media on February 7th, Gazprombank, one of the 15 banks participating in the CBDC pilot, issued a public statement with a recommendation to proceed with caution regarding the interests of traditional banks. The statement read, “It is imperative that banks take measures to mitigate potential losses.” As a result, it is of the utmost importance to be aware of the possible dangers that are connected with the transition to a digital ruble and to approach its implementation with extreme care, giving the monetary system the time to readjust.

Nevertheless, the statement acknowledges that the CBDC will contribute to more openness across the whole of the Russian economic and financial system.

The Russian division of McKinsey calculated that conventional banks might potentially suffer losses of around $3.5 billion (250 billion rubles) in the first five years as a result of the adoption of CBDC. During the same time period, the consulting company predicted that the stores would make an annual profit of $1.1 billion.

The planning stages of a CBDC were initiated in Russia around the year 2020. The completion of the transition to the digital rouble, which is presently undergoing testing for settlement with the banks, is anticipated for this year. The most recent update to the Bank of Russia’s monetary policy indicates that the regulatory body would start the process of connecting all banks and credit institutions to the digital rouble network in the year 2024.

Additionally, the Central Bank of Russia has initiated the process of creating a cross-border settlement system that will make use of a CBDC. When Russia began a full-scale invasion of Ukraine at the end of February 2022, the nation was already facing rising financial and economic sanctions as a result of the intensification of the conflict between Russia and Ukraine.


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Russia largest bank is moving forward with the plan

Sberbank, the biggest bank in Russia, is pushing ahead with the plan to deploy its decentralised financing (DeFi) platform. The bank is now getting ready to test out the product within the next few months.

The head of Sberbank’s Blockchain Lab, Konstantin Klimenko, said on February 3 that the financial institution anticipates beginning open trials of its DeFi platform by May 2023. This information was published by the regional news outlet Interfax.

According to Klimenko, the new DeFi platform from Sberbank is now undergoing testing in a private beta phase. By the end of April, the platform will be completely open, allowing users to engage in the first commercial transactions.

The CEO said that the blockchain platform would be compatible with the Ethereum blockchain. This will enable users to transfer their assets using significant wallets, such as MetaMask, which was mentioned in the previous sentence. Klimenko also said that users would have the ability to move their assets from other platforms to this one.

The blockchain executive noted that Sberbank’s DeFi platform is working toward the goal of becoming a leading participant in the DeFi ecosystem in Russia. In addition to this, he was positive about the potential of decentralised finance systems to supplant the conventional financial services market.

This news is in keeping with Sberbank’s previously revealed intentions to permit DeFi apps on the bank’s infrastructure, therefore it makes sense that the bank would make this announcement now. Sberbank made the announcement in November 2022 that its proprietary blockchain technology will soon be compatible with smart contracts and apps running on the Ethereum network. This was one of the new features that was introduced.

It is not obvious how the future platform is going to be controlled, which may be due to the fact that Russia has not yet developed any regulations regarding digital money. Anatoly Aksakov, the chairman of the Duma’s Committee on Financial Market, claims that Russia would “certainly” implement cryptocurrency legislation in the year 2023.

According to earlier reports, Sberbank had a difficult time launching several blockchain products over the last few years since the Russian central bank repeatedly delayed their registration. Sberbank had anticipated launching its digital asset issuance platform in 2021, but it did not gain clearance from the Bank of Russia until the spring of 2022. The Russian government owns 50% plus one share of Sberbank, making it the institution’s largest stakeholder.

On February 2, Alfa Bank, which is one of the largest private banks in Russia, was granted permission to issue digital assets, joining Sberbank, the state-backed tokenization platform Atomyze, and the fintech company Lighthouse. Sberbank was the first financial institution in the country to be granted this permission.


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Binance shuts down accounts in relation to Bitzlato investigation

In connection with the investigation being conducted by Bitzlato, the cryptocurrency exchange Binance has been secretly closing various user accounts on the site.

On the 18th of January, a number of Russian-speaking customers of Binance voiced their dissatisfaction with the exchange for blocking their accounts and preventing them from withdrawing their assets. The people who were impacted by the problem established a Telegram group conversation in order to report it and said that their accounts had been disabled without any prior notification.

Immediate comparisons were made between the obstructions and an enforcement action taken by the United States Department of Justice against the cryptocurrency business Bitzlato. The membership of the organisation, which currently numbers more than 1,000 people, made the connection almost immediately. Binance was recognised as one of Bitzlato’s top Bitcoin (BTC) counterparties by the United States Financial Crimes Enforcement Network (FinCEN).

The use of Bitzlato, including both incoming and outgoing transactions between Bitzlato and Binance accounts, has been publicly acknowledged by a significant number of conversation participants. Some of the users who were impacted have voiced their displeasure and uncertainty over the measures taken against Bitzlato.

One conversation participant wrote: “Though I haven’t been banned anyplace yet, I merely lost some on BTC-e, Wex, and now it’s Bitzlato, but I consider these bans to be lawlessness.” Despite the fact that they haven’t banned them yet, they have lost their funds on BTC-e, Wex, and now Bitzlato.

“Blockages relating to Bitzlato are a complete waste of time. Since they have not been found guilty up to this point and there are simply allegations, how can this money be dirty? Another user had this question.


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