One of the world’s largest cryptocurrency exchanges was supposed to be banned in China but has received a soft touch from the government.
- In 2017, the Chinese central bank banned the use of cryptocurrencies in China, with broader restrictions going into effect in 2021.
- Binance, founded by Chinese native Changpeng Zhao, formally moved its headquarters from China to Japan in 2017, but the company continues to operate billions in trading within the country.
- The Wall Street Journal reports that Binance saw $90 billion in cryptocurrency trading in May 2023, accounting for 20% of the exchange’s worldwide volume.
- The exchange maintains a strong footprint in China, with multiple employees stationed within the country and its investigations team working closely with law enforcement to police criminal activity among active users.
Why It’s Important
Binance faced much scrutiny from the Chinese government and was formally supposed to cease trading and leave the country by 2021. As a central bank spokesperson tells The Journal, “The Binance.com website is blocked in China and is not accessible to China-based users,” a company spokesman said without commenting further. Its continued presence would suggest that China is willing to lighten its ban to allow Binance to continue operating.
“China’s cryptocurrency market remains strong, with healthy transaction volumes across both centralized and [decentralized] services,” says Chainalysis director Kim Grauer.
Internally, Binance considers continued operations in China as one of its biggest priorities. While the bank technically considers it an illegal business, it continues to operate there through what appears to be intricate ties to the government and very public efforts to comply with government regulations.
Backing Up A Bit
Globally, Binance faces issues in multiple countries. It has faced regulatory challenges in multiple countries since its founding, with the U.S. Securities and Exchange Commission filing a lawsuit against the exchange and its founder in June over alleged securities violations and misuse of customer funds. The UK’s Financial Conduct Authority, U.S. Justice Department, and other financial institutions have similarly scrutinized and investigated the exchange.
A recent report from Semafor suggests that the Department of Justice is planning to file fraud charges against Binance but fears the effect that an FTX-style bank run could have on the exchange and overall crypto economy. As we previously reported, Binance has faced concerns about similar liquidity issues that resulted in the largest collapse in crypto history.