crypto strategy

Binance: ‘Non-Compliance’ in Maltese Years as US Issues Subpoenas

Binance Chief Strategy Officer Patrick Hillmann admitted in an interview with The Washington Post that the world’s largest cryptocurrency exchange that moved to Malta in 2018 “had shortcomings in its approach to regulatory compliance. during the first years of its rapid expansion”.

Binance, launched in 2017, moved to Malta in those same early years, during the Joseph Muscat administration’s “Blockchain Island” fever, after leaving China and Japan due to their strict regulations.

During its short time in Malta, Binance is believed to have been very lightly regulated, if at all.

According to Hillman, the company has now changed its ways and is trying to break away from its flimsy regulatory compliance beginnings.

Like he said Washington Postt, “During the last two years [i.e. since 2020], the company has completely changed its posture. Now that we have these resources, we are easily one of the most proactive parties in identifying, freezing and recovering “laundered” funds.

Binance said it was to move to Malta in March 2018, and in October 2018 Malta passed its blockchain law which allowed crypto companies to apply for licenses to operate from the country.

Binance was operational in Malta between October 2018 and October 2019, when businesses in the cryptocurrency industry, particularly exchanges that moved to Malta and before the October 2018 effective date of the new law, had one year – until October 2019 – to apply for clearance by becoming compliant.

Until “grandfather period” elapsed and their requests were processed, companies such as Binance were essentially exempt from the need for authorization or even the need to comply with anti-money laundering laws.

This largely explains the rush of big companies, including Binance, showing interest in setting up shop in Malta at a time when other governments were focused on regulating the sector.

It was just before the end of this concession period that Binance informed the Malta Financial Services Authority that it had abandoned its plan to establish itself in Malta.

A Reuters investigation showed how a torrent of illicit funds passed through Binance between 2017 and 2021. He found that during this period, Binance processed transactions totaling at least $2.35 billion from predicate crimes such as hacking, investment fraud, and the sale of contraband drugs. Binance’s period in Malta falls right in the middle of this.

Reuters made the calculations by reviewing court records, law enforcement statements and blockchain data that was compiled for the news agency by two blockchain analytics firms.

Now, US federal prosecutors are examining US hedge funds’ dealings with Binance as part of their lengthy investigation into potential violations of money laundering rules at the exchange. They are likely to focus on the Binance Malta stretch as well.

In recent subpoenas reported by The Washington Post, the U.S. Attorney’s Office for the Western District of Washington in Seattle asked investment firms to make available records of their communications with Binance.

This criminal investigation is would have started in 2018, just like Binance landed on “Blockchain Island”. These investigations focus on Binance’s compliance with US anti-money laundering laws and sanctions.

But despite leaving Malta at the end of the loosely regulated “grandfather” interim period, Binance has kept exploit the cover he received in Malta to inform his users around the world that he was “governed by the laws of Malta”.

This led the MFSAtwice, once in February 2020 – after the departure of Joseph Muscat, Keith Schembri and Konrad Mizzi from the government – ​​and again in July 2021 to clarify that Binance is not allowed to operate under Maltese law.

“Binance is not authorized or licensed by the MFSA to conduct VFA-related activities in or from Malta and therefore does not fall under the regulatory oversight of the MFSA,” the regulator said.

Although Binance has all but disappeared from Malta, it has left behind two companies that are still active: Binance Marketing Services Limited and Binance Europe Services Limited.

Both were created in April 2018, are led by Guangying Chen, and are owned by Binance Founder and CEO Changpeng Zhao.

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