It’s been reported by Bloomberg that the Australian Securities and Investments Commission (ASIC) searched Binance’s Australian office as part of an investigation into the exchange‘s derivatives business, which has since been shut down.
Whilst the leading exchange have not confirmed or denied the reports, Reuters quoted a spokesperson of Binance Australia as saying: “We are cooperating with local authorities, and Binance is focused on meeting local regulatory standards in order to serve our users in Australia in a fully compliant manner.”
The probe into Binance Australia’s operations began after it was discovered that Binance erroneously classified retail traders as wholesalers, thereby leaving them exposed to risks. The misclassification meant that the traders were not under consumer protections, which includes the right to dispute resolution as they should, according to Australian law.
ASIC subsequently cancelled Binance’s licence on 6 April. The regulatory watchdog also announced that Binance customers will no longer be able to open new derivatives positions or increase existing ones from 14 April. It gave them a week more to close existing derivatives positions.
Despite the cancellation, Binance is still recognised as a member of the Australian Financial Complaints Authority until 8 April 2024.
Following the announcement, ASIC chair, Joe Longo emphasised the importance of licence holders correctly classifying clients.
“It is critically important that AFS licensees classify retail and wholesale clients in accordance with the law. Retail clients trading in crypto derivatives are afforded important rights and consumer protections under financial services laws in Australia, including access to external dispute resolution through the Australian financial complaints authority. Our targeted review of these matters is ongoing, including focus on the extent of consumer harms,” he said.
Binance regulatory setbacks continue
Binance regulatory woes have compounded lately. The leading exchange recently exit the Dutch market after failing to secure a virtual asset service provider (VASP) license.
It said in an announcement: “Binance has been in a comprehensive registration application process as a virtual asset service provider (VASP) with the Dutch regulator. Although we explored many alternative avenues to service Dutch residents in compliance with Dutch regulations, unfortunately this has not resulted in a VASP registration in the Netherlands at this time.”
Efforts to secure a licence in Germany also hit a roadblock after the country’s regulator, BaFin denied its application late last month. The reason for the disapproval remains unknown, but Binance through a spokesperson expressed their commitment to securing the licence. Germany’s disapproval mirrors the position of its neighbour Austria who mounted pressure on Binance, forcing it to withdraw its license application.