Residents of the United States of America are forbidden to trade crypto derivatives which are leveraged gambles on quixotic and unstable assets. International cryptocurrency platforms should be no stranger to these laws set by the Federal regulator, CFTC (Commodity Futures Trading Commission), with which crypto platforms must register the derivatives. The CFTC was investigating the world’s largest cryptocurrency exchange, Binance, for alleged money laundering and tax-evasive offenses. And the CFTC just sued Binance for flouting the rules of crypto derivatives.
This regulatory inquiry invoked on one of the biggest players of Cryptoverse is prompting worry in investors’ minds, straining credibility, right after they contended that the rise of the Bitcoin price was proving the fortitude of Cryptocurrency. According to Bloomberg, The Internal Revenue Service and Securities and Exchange Commission (SEC) are also scrutinizing Binance.
The cryptocurrency industry lost the charm of two of its massive connections to the conventional banking system through the fall of Silvergate Bank and Signature Bank.
But, what are Crypto Derivatives? Tradable financial instruments that derive value from an underlying asset such as cryptocurrency, but allow traders to avouch for the price movement without owning it, are termed as crypto derivatives.
Since 2018, crypto exchange Binance is being probed for sanctions violations and CEO Changpeng Zhao has been under the notoriety limelight for unlicensed money laundering conspiracy. In a feeble effort to pick up the gauntlet and wipe the slate of illicit deeds clean, Binance briefly beguiled its rival FTX before bailing out.
The Sam Bankman-Fried-led company was allegedly convicted of colluding with Caroline Ellison, Alameda Research’s CEO when reports of the FTX Collapse, surfaced worldwide. The crypto exchange led by Bankman-Fried and other conspirators, now at the focal point of a colossal federal fraud investigation, mismanaged customer funds and revealed the FTX bankruptcy, leading to misery within the crypto fraternity.
A Reuters report suggested that Binance transacted $10 billion for criminals and companies eluding the US.
Crypto Binance’s Tussle With The CFTC:
The CFTC suspects Binance’s Zhao of violating US trading laws by meandering the path of felonious endeavors – covertly coaching ‘VIP’ US customers on how to eschew compliance controls.
The federal commission regulates US derivatives trading and has proclaimed that Binance’s CEO Zhao had instructed his employees and customers to maximize profits by dodging compliance rules.
The CFTC isn’t qualified for initiating criminal charges but has the power to ban the cryptocurrency platform Binance from registering in the US and also gun for hefty fines.
The news of the lawsuit broke out on Monday, prompting Binance to release a statement that refuted the ‘unexpected and disappointing’ allegations and slander, swearing to have always invested substantially in keeping the US-based investors at bay, away from the crypto platform.
Zhao asked despondent crypto folks to ‘ignore FUD, fake news, and attacks’ [The term FUD is slang for Fear, Uncertainty, Doubt in the crypto-code].
Binance’s long-disputed claim of not being subjected to US laws attributable to not having physical headquarters anywhere, except whether CEO Zhao is present at any point in time, is being rebuked by the CFTC as a deliberate overture to avoid regulation.
My Response to the CFTC Complaint | Binance Blog https://t.co/TadyotM7HN
— CZ 🔶 Binance (@cz_binance) March 27, 2023
CFTC is echoing this deception as one of those moments of clandestinity that cannot be easily forgotten. US customers are not just gaining access to the imperilments of offshore crypto derivatives, which are unlawful, but also doing so is effortless – with just a VPN connection and strong guts.
The Plausible Fallout For Binance:
This lawsuit brings more woes for the crypto fraternity. Prices of Ethereum and Bitcoin fell about 3 percent on Monday. Crypto compliance expert at the Blockchain Intelligence Group, Timothy Cradle predicts that the most probable outcome of this investigation for Binance will be getting fined for ‘hundreds of millions of dollars’. Additionally, Binance will lose any future opportunity to register any derivatives exchange with the US.
Surely a tempest for US Crypto users who accessed the services of Binance and a revenue hit for the company whose derivatives product revenue contribution from US users was 16 percent.
