Binance Holdings Ltd., the largest cryptocurrency exchange in the world by trading volume, is being investigated by the U.S. over money laundering and tax concerns, Bloomberg TV reported.
TV anchor Romaine Bostick, co-host of “Bloomberg Markets: The Close,” tweeted that Binance is said to face investigations from the Justice Department and Internal Revenue Service.
“Tom Schoenberg reporting that officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business, according to people with knowledge of the matter who asked not to be named because the probe is confidential,” Bostick tweeted.
Based in the Cayman Islands, Binance has thrived outside the scope of government oversight, Schoenberg wrote in a Bloomberg report. Chainalysis Inc., a blockchain forensics firm whose clients include U.S. federal agencies, concluded in 2020 that more funds tied to criminal activity flowed through Binance than any other crypto exchange.
Binance spokeswoman Jessica Jung confirmed in a statement that the company is working with regulators. “We have worked hard to build a robust compliance program that incorporates anti-money laundering principles and tools used by financial institutions to detect and address suspicious activity,” Jung said.
What exactly the Justice Department and IRS are investigating has yet to be determined. However, U.S. officials have expressed concerns that cryptocurrencies are used to hide illegal transactions such as drug deals and theft, and that people making money trading crypto stocks are evading taxes.
“Such worries have been a hindrance to the industry going mainstream, even as Wall Street increasingly embraces Bitcoin and other tokens amid a global investing frenzy,” Bloomberg reported.
The May 6 data cyber-attack against Colonial Pipeline Co. that triggered fuel shortages across the Eastern U.S. is the latest confirmation of fears harbored by crypto critics. Colonial paid Eastern European hackers a ransom of almost $5 million in untraceable cryptocurrency hours after the pipeline was breached, Bloomberg News reported Thursday.
On Wednesday afternoon, Tesla founder Elon Musk made a U-turn on Bitcoin, saying that he will no longer allow his company’s electric vehicles to be bought using the cryptocurrency because of environmental concerns. Hundreds of billions of dollars were wiped off the entire cryptocurrency market within three hours of Musk’s tweet.
“Energy usage trend over past few months is insane,” Musk tweeted.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
Buying and selling derivatives in the U.S. is regulated by the Commodity Futures Trading Commission. Binance is not registered with the CFTC and has an office in Singapore but claims to lack a single corporate headquarters. The company at the time had reportedly not been accused of misconduct.
It doesn’t matter where crypto exchanges are based. If U.S. residents are trading on them, crypto platforms face strict customer protection and oversight demands. The CFTC considers virtual currencies such as bitcoin and ether to be commodities and claims jurisdiction over their futures and other derivatives.
“The scrutiny is the latest sign that market watchdogs may thwart the crypto industry’s ambitions of becoming more mainstream for U.S. investors,” Bloomberg reported at the time.
Read more about Binance