The US Justice Department and Internal Revenue Service has the world’s biggest cryptocurrency exchange, Binance, under scrutiny over money laundering allegations.
In a report by Bloomberg, the department is asking people familiar with the company’s business dealings for clarity into its investigation.
Characterising Binance as a channel through which illegal funds pass through, forensics company, Chainalysis, said that illicit monies flow through the platform more than any other extant crypto exchange.
Founded by Changpeng Zhao and Yi He in 2017, Binance has continued to entrench itself as the dominant name in the realm of cryptocurrency exchanges, providing users with over 500 cryptocurrencies and virtual tokens, and also birthing its own token, Binance Coin.
A statement issued by the company’s spokesperson, Jessica Jung, emphasised the company’s compliance with regulations and law enforcement.
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It said, “We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion.
“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.”
Binance, Illicit Funds, Govt. Concerns
Being an unregulated industry, transactions in the world of cryptocurrency flow unhindered, which continues to be a point of concern for governments.
In the United States, authorities fear that illicit funds gained from drug dealing were transacted using cryptocurrency, causing it to be an undesirable form of transaction avenue for policymakers.
This concern mirrors that of the Federal Government of Nigeria, as the country’s apex bank restricted traditional banking institutions from processing transactions linked to cryptocurrency.
The Central Bank of Nigeria, in a statement, had said that cryptocurrencies “are largely speculative, anonymous and untraceable they are increasingly being used for money laundering, terrorism financing, and other criminal activities.”
It added that the “high volatility” of trading cryptocurrencies could lead to profitability loss by small retail and “unsophisticated investors”.
The government of India had also announced that it was working to introduce legislation that would ban cryptocurrencies, and anyone caught trading fined.
India’s finance minister, Nirmala Sitharaman, had allayed fears, stating that authorities merely wanted a clear understanding of the digital world.
She said, “I can only give you this clue that we are not closing our minds, we are looking at ways in which experiments can happen in the digital world and cryptocurrency.”
The core of the investigation into Binance is yet to determined but a Bloomberg source said that both the company’s customers and employees were under review.
As for Binance allowing itself to be a channel for illegal trades used by Americans, a probe by the US Commodity Futures Trading Commission would determine.
