Binance, the largest trading exchange for cryptocurrencies such as Bitcoin and Ethereum, has been fined more than 3.3 million euros by De Nederlandsche Bank (DNB). The crypto exchange will be fined for not having a legally required registration with DNB, the financial regulator reported Monday. Binance has already received a warning.
The purpose of the registration obligation for providers of crypto services is to combat crime, such as money laundering or terrorist financing. Criminals often use cryptocurrencies for this purpose because the transactions are anonymous and impossible or difficult to trace. If cryptocurrencies do not register, “a large number of unusual transactions may remain out of sight of the investigative authorities”, according to DNB.
Objection to fine
Binance already received the fine at the end of April this year and filed an appeal against the decision more than a month later. The fact that the fine is relatively high – according to DNB the ‘base amount’ is 2 million euros – is due to a number of factors, according to DNB. For example, the trade fair, which trades more than 13 billion euros every day, has many customers in the Netherlands. It also counted that the stock market had been active without registration since 2020, and had already received several warnings.
According to DNB, these matters would have given Binance competitive advantages: the crypto exchange did not have to spend money on compliance and supervisory costs. Binance has since submitted a registration application and, according to the central bank, has been transparent in that process so far.
Binance is a platform that offers online trading services and custodian wallets. The company was founded in 2017 by Chinese Changpeng Zhao. It is known for not having a formal corporate structure, but a number of self-operating departments. Binance therefore has no official headquarters, but it is registered in the Cayman Islands, a well-known tax haven.
Risk for consumers
With the fine imposed by DNB, the Netherlands is joining a list of countries where the regulator is critical of the trading platform. The watchdogs in the United States, the United Kingdom and Germany also investigated the working method of the crypto platform. The UK’s Financial Conduct Authority ultimately concluded that Binance’s operations could not be properly monitored, posing a risk to consumers. They run the risk of being involved in money laundering in practice.
Strikingly enough, France, Italy and Spain have so far opted for a completely different attitude. These three countries have received Binance without criticism. This caused a stir in France: in June, parliamentarian Aurore Lalucq told the Financial Times that the regulator’s decision not to warn against Binance was ‘incomprehensible’.
A version of this article also appeared in the newspaper of 19 July 2022