- Binance has been in the middle of a bad buzz these past few days,
- the exchange “took hostage” Bitcoins (BTC) from catxolotz, one of its users, accused of having attempted to send them to the Wasabi mixing service,
- Online casinos, anonymization services, P2P gateways … Binance is assuming an increasingly broad right of inspection over the use made by its users of crypto-assets, after the funds have left its platform,
- CZ, the CEO of Binance has split an article to explain the position of the exchange facing regulatory constraints.
Bitcoins from Schrödinger’s crypto-cat, neither inside nor outside
Quantum allegory for once but which summarizes not badly the mishap experienced this week by the user @Catxolotl that Bitcoin reported a few hours ago.
In summary, our unfortunate hero had the impudence to think that he could freely enjoy his Bitcoin (BTC) stored on Binance, and attempted to send them to the mixing service Wasabi. Binance found the approach suspicious and it was only after surrealist exchanges with customer service and having agreed to exhibit his genealogy over 4 generations and promised (yes “promised”) not to use his Bitcoin to send them to an anonymization service, that the situation has finally been resolved.
The whole thing was obviously presentation on Social Networks, the communication effect is deplorable and the case was deemed sensitive enough to push changpeng Zhao, the CEO of Binance himself to split an explanatory article to try to put out the incipient fire.
Here is a French translation of this article.
CZ explains about regulations, exchanges and confidentiality
“Recently, a user of Binance Singapore was surprised when his account was flagged for AML / KYC checks because he was using a mixing service. Her Twitter post sparked a number of comments. More importantly, from the comments, it is clear that there is still a lot of confusion about regulations affecting KYC, at the AML, privacy, and more broadly how these imperatives relate to different types of crypto exchanges. Although I am not an expert, I will share my best knowledge on these issues and I hope they can help you too.
Regulation is a broad subject that is beyond the scope of this short article. We will stick to the fundamentals here. Although it varies by country, there are two basic requirements that are relatively universal for most regions: KYC and AML.
KYC (know your customer) implies that the purse must know the client. This is why exchanges require an identity document, proof of address, etc.
AML (anti-money laundering) means that the exchange office has to analyze each transaction and make sure that it is not related to money laundering, sanctions or fraud.
Both for KYC and AML, there are specialized third-party services who perform the analysis on behalf of the platforms, in collaboration with the regulatory bodies. In the world of fiat money, banks ask for information on sources of funds, proof of address, etc. In the crypto world, there are service providers who analyze blockchain transactions and assign different risk scores to different transactions. Most regulators require that exchanges use these third-party providers. It is not up to the exchange to make this choice. Many people don’t realize it and blame the stock market. We will come back to this in detail later.
Now let’s quickly go over the different types of exchanges.
These are scholarships domiciled in a specific country which has clear regulations or at least some official guidelines. Some countries issue a clear “crypto exchange license”. Others require that the exchanges register with a specific agency in the country, while still others simply ask the exchanges to obtain licenses for traditional financial services. Again, each country is a little different.
For lack of a better word, we will use the term “unregulated” here. These are usually stock exchanges that are either domiciled in a country that does not have clear guidelines, or that are not domiciled in a particular country.
Decentralized exchanges (DEX)
Although the above two types mainly refer to centralized exchanges, there are many DEX. They are usually built on a smart contract or blockchain. Most of them have no specific address and are generally “unregulated”. They have different levels of decentralization, but this is a topic in its own right.
Most regulations place the fight against money laundering above privacy. This means that they will require exchanges to perform AML checks. Scholarships have no option here. Technically, exchanges have two choices:
- 1. do AML checks,
- or 2. not to do business in this country. Option 2 does not help anyone.
As a user, you have choices:
Use a regulated exchange knowing that there will be AML controls in the background, like for banks. You will be required to follow the laws, wherever you reside, regarding crypto trading. This will save you and the stock market a lot of trouble. Going from one exchange to another will not help you.
Use an unregulated exchange, knowing that there will be specific risks. Choose your purse wisely.
Use a DEX. These generally have lower liquidity and no access to fiat currencies.
If you’re really serious about privacy, you should consider using confidential crypto, as the name suggests.
And what about Binance?
Binance has evolved into more than just a business or a centralized exchange. There are a number of regulated fiat-crypto exchanges using the Binance brand and technology, including Binance Singapore, Binance.US, Binance Jersey, etc.
All of these entities are operated independently and are fully comply with their local regulations. There is of course a Binance.com global telephone exchange. And there is also a DEX Binance operating upstream of the BinanceChain, maintained by a group of community developers.
At Binance, we strive to provide you with different choices and different levels of privacy. We do not live in a perfect world. There are different trade-offs with each of the choices. It is important to understand the choices available to us and the world in which we live. I hope this article will help you understand them.
We believe that protection of privacy is a fundamental right and we support initiatives focused on the protection of privacy. “
Nice to meet you, it’s Hellmouth! Editor-in-chief of Bitcoin, the crypto media you are honoring to survey right now (well done, you have taste).
Crypto-enthusiast of the second hour, nothing is more important to me than supporting the global adoption and democratization of the treasures that the blockchain offers us.
I write articles between two cocktails in Tahiti, my adopted island, and do not hesitate, if the opportunity arises, to feast on a plump scam or a little too enterprising Ponzi pyramid.
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