It is rumored that Binance Exchange is facing investigation by the US Department of Justice and the Internal Revenue Service, which has once again caused a shock in the cryptocurrency market

Cailian Press (Shanghai, editor Shi Zhengcheng) reported that less than 24 hours after Musk lamented that Bitcoin was "not environmentally friendly" and caused a stir in the cryptocurrency market, this extremely popular but basically unregulated field has once again encountered negative news.

According to U.S. media reports on Thursday, the U.S. Department of Justice and the Internal Revenue Service are investigating Binance, the world's largest cryptocurrency exchange, involving money laundering and (illegal) tax evasion. At present, law enforcement agencies have obtained some information from people who understand Binance's business. Although both organizations have the authority to investigate potential violations, not all investigations will turn into formal charges.

Affected by the relevant news, Bitcoin fell briefly and touched the $47,000 mark, and Binance Coin fell by more than 10% in a short period of time.

(BNB/USD five-minute chart, source: TradingView)

According to people familiar with the matter, those involved in the Binance investigation include prosecutors from the U.S. Department of Justice's Bank Integrity Unit, which is responsible for investigating complex cases involving financial institutions, and investigators from the Seattle District Attorney's Office. The IRS investigation has been going on for several months, and the questions they asked to people familiar with the matter showed that Binance's customers and employees were all under investigation.

About two months ago, there were also reports that the U.S. Commodity Futures Trading Commission (CFTC) was investigating whether Binance allowed U.S. investors to illegally buy and sell derivatives related to digital tokens. According to relevant laws, Americans cannot purchase such assets that are not registered with the CFTC.

Binance responds: Things are not as bad as the headlines say

In response to media reports, Binance Exchange said that the company takes its legal obligations very seriously and works with regulators and law enforcement in a collaborative manner. The company has been working hard to build a strong compliance program that combines anti-money laundering principles and tools used by financial institutions to detect and deal with suspicious activities. At the same time, Binance has a good record of assisting global law enforcement agencies, including the United States.

Founder Zhao Changpeng also said on social media that the title of the "news" looks bad, but the content is actually not that bad. The report describes how Binance cooperates with law enforcement agencies to crack down on bad players, but somehow it looks like a bad thing.

(Source: Social Media)

Regulators need to provide evidence that U.S. users are involved

For the investigation of relevant departments, there is not only a lack of regulatory framework for cryptocurrency exchanges, but also the operation mode of the entire industry has greatly increased the difficulty of investigation. Take Binance as an example. Although the company was established in the Cayman Islands and has an office in Singapore, the company clearly stated that there is no so-called headquarters.

At the same time, any investigation into Binance requires at least proof that the company provides services to U.S. citizens. Binance has always emphasized strict compliance with U.S. law, prohibiting Americans from using the site, and using advanced technology to analyze signs of illegal activities such as money laundering. Last year, the platform also publicly stated that if Americans were found trading on the platform, it would take measures such as blocking accounts.

According to people familiar with the matter, before Binance US went online, some American customers were advised to use a virtual proxy network to disguise their location. A Binance spokesperson responded that the company has never encouraged American citizens to use this method to circumvent company rules. In January of this year, Binance founder Zhao Changpeng also said on social media that even if Americans use this method, Binance's system will prohibit them from connecting.

It is worth mentioning that Binance has also recruited many people familiar with US regulation in recent years. Among them, Brian Brooks, former acting director of the US Office of the Comptroller of the Currency (OCC), has served as the CEO of Binance US since this month, and Max Baucus, former chairman of the US Senate Banking Committee and former US ambassador to China, also became Binance's government relations consultant in March this year.