According to a report by The Wall Street Journal (WSJ), Binance, the world’s largest cryptocurrency exchange, and CEO Changpeng Zhao (CZ) are facing intense scrutiny from regulators in the European region following lawsuits filed by U.S. federal regulatory agencies SEC and CFTC against the cryptocurrency exchange. Binance, which had to withdraw from certain EU countries such as the Netherlands and Austria, recently decided to withdraw from Germany after regulators advised it to withdraw its license applications.
Binance Faces Regulatory and Banking Crisis
BaFin, Germany’s financial regulator, advised Binance to withdraw its license application in the country. According to WSJ’s report on July 29, the regulatory agency cited concerns about CZ’s complex structure and the cryptocurrency exchange’s organization, which made it difficult for the regulator to exercise control. Sources close to the matter revealed that CZ was unlikely to pass the tests required for the license. Additionally, Binance’s organizational structure limited the regulatory agency’s oversight.
Binance has withdrawn its license applications from the Netherlands, Austria, Germany, and South Cyprus. In France, Belgium, and the United Kingdom, financial regulators are still conducting their investigations. Furthermore, Binance has also lost its banking partner, PaySafe, in Europe. According to WSJ, Binance’s access to the U.S. dollar and Australian dollar has become significantly limited due to banking issues, and it has been cut off from the European banking system as well. The challenges faced by CZ are increasing amidst the growing number of investigations in the European region. The departure of top-level executives from Binance’s subsidiaries worldwide has further exacerbated the difficulties.
A spokesperson for Binance, commenting on the BaFin development, stated that the withdrawal of the license application was due to various reasons, including efforts to obtain a new cryptocurrency license from the European Union. The spokesperson added, “Binance will continue to collaborate with regulatory authorities and will pursue obtaining the necessary regulatory approval to actively operate in Germany.”
Current Status of Lawsuits and Investigations Against Binance in the U.S.
Binance, amidst these recent developments, submitted a petition to dismiss the lawsuit filed by the CFTC, claiming that the regulator has no jurisdiction over global assets and that the charges brought against them are unclear.
Following the lawsuit filed by the CFTC, the SEC also filed a lawsuit against Binance.US, Binance, and CZ at the beginning of last month, shaking the cryptocurrency market. Binance, which claims not to have violated any securities laws, reached an agreement with the SEC to separate the wallets, funds, and management of Binance and Binance.US.
Furthermore, Binance is also the target of an investigation by the U.S. Department of Justice (DoJ). Experts believe that the DoJ will soon file a lawsuit against the cryptocurrency exchange and CZ.