Binance, the world’s largest cryptocurrency exchange, announced on Friday that it is closing its Dutch operations since it was unable to meet registration requirements.
“With immediate effect, no new users residing in the Netherlands will be accepted,” says the company in a release.
From 2023-07-17 at 00:00 UTC (2023-07-17 at 02:00 UTC+2), existing Dutch resident users can only withdraw assets from the Binance platform and no further purchases, trades or deposits will be possible.
Binance is sending out an email to existing Dutch resident users with comprehensive information about the implications for their accounts and any assets they currently have on the Binance platform alongside any steps they will need to take.
Couldn’t get VASP registration
The crypto exchange claims to have been in a comprehensive registration application process as a virtual asset service provider (VASP) with the Dutch regulator.
Despite exploring various options to comply with Dutch regulations and cater to Dutch residents’ needs, it couldn’t obtain VASP registration in the Netherlands, says the company.
Last year, the Dutch Central Bank (DNB) imposed a fine of €3.3M on Binance for offering crypto services in the Netherlands without legal registration with DNB.
However, the company says it will continue to operate in France, Italy, Spain, Poland, Sweden, and Lithuania since it complies with EU standards on money laundering prevention and financing of terrorism as evidenced by its registrations.
Binance vs US Securities and Exchange Commission
The announcement comes a few days after the US Securities and Exchange Commission (SEC) accused Binance and its founder Changpeng Zhao of operating an elaborate scheme to evade US federal securities laws.
Consequently, the SEC charged the cryptocurrency exchange and Zhao with 13 offences, including operating an unregistered securities exchange. It also failed to restrict US customers from its platform, reports Reuters.
“We are disappointed that the U.S. Securities and Exchange Commission chose to file a complaint today against Binance seeking, among other remedies, purported emergency relief. From the start, we have actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns,” Binance says in a press release.
“Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations. But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate. We are disheartened by that choice” the release adds.
According to the SEC’s complaint, Binance violated US regulations by commingling customer funds in an account controlled by Merit Peak. This firm is owned by Zhao. It breached the requirement to separate customer funds.
Merit Peak’s US bank account received over $20B, including customer funds from the Binance platform and its US affiliate, Binance US, alleges SEC.
The majority of these funds were then transferred to an undisclosed company, presumably for purchasing Binance’s custom dollar-linked crypto-token, BUSD, reveals SEC.
The SEC also alleged that Zhao and Binance diverted customer assets at their will, including transferring funds to a Switzerland-based trading firm called Sigma Chain, which is controlled by Zhao.
Merit Peak and Sigma Chain were used to transfer tens of billions of dollars involving Binance, Binance US, and related entities. The SEC revealed that at least $145M was transferred from Binance US to a Sigma Chain account in 2021, and $11 million from that account was spent on a yacht.
In another instance, the SEC accused Zhao of maintaining control over Binance’s US business. This was despite public statements suggesting Binance restricted US customers from trading on the platform.
The SEC claimed that Binance evaded its own controls and allowed US customers to continue trading.
Zhao was accused of intentionally evading US laws and resisting regulation for Binance.com.
Binance announced a partnership with BAM Trading in 2019 to launch Binance.US and comply with U.S. laws. The SEC asserted that Zhao directed Binance.US, contradicting the entity’s independence claim.
Zhao allegedly instructed Binance US to onboard Sigma Chain and Merit Peak as market makers, both operated by Binance employees. One employee even controlled Binance US’s US dollar bank accounts.
The SEC also stated that Sigma Chain engaged in wash trading, artificially inflating the trading volume of crypto asset securities on the Binance US platform from September 2019 to June 2022.
Sigma Chain held multiple user accounts on Binance US and fraudulently increased trading activity, according to the SEC.
