Why does Binance have very different attitudes towards regulators in different countries?

In the past two days, regulatory agencies in Canada, Japan, and the United Kingdom have successively issued warnings to Binance, and Binance quickly issued an announcement on June 26 to stop providing services to citizens of Ontario, Canada. For the warning from the United Kingdom, Binance 28 In a belated response, Binance Group, which acquired Binance Markets Limited (BML) in May 2020, has yet to launch its UK business or use its FCA regulatory license.

According to Binance, BML is an independent legal entity and has no influence on Binancecom through the Binancecom website that does not provide any products or services. We take a collaborative approach when working with regulators and take our compliance obligations very seriously. We are actively understanding the changing policies, rules and laws in this new field. However, Binance did not explain whether it will continue to provide services to British users.

Bybit, which was previously warned by the UK, responded very quickly and asked: If you are a UK resident or citizen, please close all positions and withdraw all account balances before 8:00 am on March 31, 2021. It all started when the UK started cracking down on cryptocurrency derivatives. The UK FCA emphasizes that we do not regulate encrypted assets like Bitcoin or Ethereum, but we regulate certain encrypted asset derivatives (such as futures contracts, contracts for difference and options), as well as those encrypted assets that we consider to be "securities".

In May of this year, in an interview with Daniel Roberts, the editor-in-chief of Decrypt, Binance founder Changpeng Zhao insisted that Binance has no headquarters. Operating in Malta, five months later, Malaysia’s Securities and Exchange Commission issued a notice stating that Binance was operating illegally in the country. Since then, Binance has also registered in the Cayman Islands and Seychelles, but exactly where its headquarters are is a mystery.

Although responding to Canadian regulators, The Block interviewed Binance’s spokesperson regarding Japan’s warning, and the reply was, “Binance does not operate in Japan and does not recruit Japanese users.” The spokesperson refused to answer. The question of whether Japanese users can access Binance and trade.

Binance has yet to respond to the UK’s warning. A long time ago, Binance had stopped serving US users and launched Binance.US dedicated to serving US users.

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Jurisdiction in international criminal cases

As far as legal jurisdiction is concerned, in order to avoid legal conflicts between different countries, the principle of international criminal cases is generally based on the principle of territoriality, that is, territorial law enforcement agencies manage cases.

In addition to the principle of territoriality, there are the principles of personality, protection and universal jurisdiction. The principle of personality refers to the fact that if a citizen of a country commits a crime abroad, the country still has jurisdiction over the citizen. For example, in the telecom fraud cases that often occur in our country, although the perpetrators often hide in Southeast Asian countries, our country still has jurisdiction over these criminals.

The principle of protection is based on the maximum protection of the interests of the country. Even if the criminal suspect is not in the country and is not a citizen of the country, this principle can be applied in order to protect the interests of the country.

In the New York Prosecutor’s Office v. Tether/Bitfinex case, Tether had filed a defense, saying that the New York Prosecutor’s Office had no jurisdiction over Tether, but the defense was rejected by the judge. Since Tether has users located in New York State, for the benefit of New York State residents , the New York Attorney's Office has jurisdiction over the company.

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Enforcement of national laws

Having jurisdiction is one thing, but enforcing laws across borders is quite another. At present, it seems that the country with the best cross-border enforcement of laws in the world is the United States-this is why most non-compliant exchanges actively avoid American users.

Specific to this warning, Binance responded quickly to Canadian regulators because Changpeng Zhao is a Canadian citizen. According to the personal principle, Canada has jurisdiction over Binance and is enforceable.

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Where is Binance headed?

At present, the biggest threat to the supervision of Binance still comes from the United States. The United States not only has strong overseas law enforcement capabilities, they also have jurisdiction over all .com domain names. On July 25, 2017, the US authorities directly suspended the domain name of btc-e.com, a cryptocurrency exchange used for money laundering.

On May 14 this year, according to Bloomberg [report](4), the U.S. Department of Justice and the Internal Revenue Service were investigating Binance on money laundering and tax evasion. In the following five days, the price of Bitcoin fell day after day, falling two times in five days. million dollars. Although the reasons for the decline include various market factors, Binance’s compliance concerns are likely to be one of the incentives.

In an era without compliance issues, Binance quickly grew into the world's number one cryptocurrency exchange, with trading volume far exceeding that of the compliant exchange Coinbase. If calculated from the ratio of trading volume, Binance's market capitalization should far exceed Coinbase. However, in recent years, the actions of regulatory authorities in various countries towards Binance undoubtedly show that Binance has a considerable compliance cost.