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Money-Laundering Binance Probe Report Adds To Bitcoin Woes

Money-Laundering Binance Probe Report Adds To Bitcoin Woes

Binance Holdings, the world’s largest cryptocurrency exchange, is reportedly under investigation by federal authorities for money laundering and tax evasion.

The US Department of Justice (DoJ) and the IRS have sought information from individuals with insight into Binance's business, according to a report by Bloomberg.

According to the report, the US Commodity Futures Trading Commission (CFTC) has been investigating the exchange for the past couple of months to determine whether Binance allowed Americans to make illegal trades on its platform.

As of June 2019, individuals who live in the United States are not permitted to trade on Binance because it offers securities that are not registered with the CFTC; however, experts claim its restrictions on Americans can easily be bypassed 

The company said it follows US regulations and blocks American citizens from accessing its website. 

In late 2019, it launched BinanceUS to serve American clients with bitcoin trading. Last month, the exchange appointed former U.S. Treasury official Brian Brooks as its chief executive. 

Binance spokeswoman Jessica Jung told Bloomberg that the company takes legal obligations “very seriously and engages 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,” she said

Much the same as the general industry, Binance has mostly avoided regulation. The company is incorporated in the Cayman Islands and has an office in Singapore.

The inquiry from the IRS comes as the agency is stepping up its efforts to force bitcoin investors to pay taxes. Earlier this week, the IRS said that it could potentially seize people’s crypto assets to settle unpaid taxes.

Robert Wearing, deputy associate chief counsel at the IRS, said crypto could be seized in the event of failure to pay taxes because the tax authorities treat crypto as property, not currency, for tax purposes.

Last month, Germany's financial regulator, BaFin, also warned that Binance may have violated European securities rules with the launch of its stock tokens.

The news is sending another shock wave through the crypto market. Bitcoin slid to a 2-1/2-month low after the Bloomberg report broke.

Prices for bitcoin and other cryptocurrencies were already reeling from a tweet by Tesla CEO Elon Musk, who said that Tesla will no longer accept payments for its cars in Bitcoin due to Bitcoin’s environmental impact.

"We are concerned about the rapidly increasing use of fossil fuels for bitcoin mining transactions, especially coal, which has the worst emissions of any fuel, " Musk explained in a tweet.

In late January, Musk added the word “bitcoin” to his Twitter profile. Just hours later, it caused a 15% rally in the currency’s value. The tweet followed Tesla investing $1.5 billion in bitcoin. Yet, following month he also caused Bitcoin’s plunge by 10% when he tweeted that the prices of bitcoin and rival token Ether seemed overvalued.

Recently, Bitcoin has been under intense scrutiny for its energy-intensive mining process.

In March, Bill Gates sounded the alarm bells over the cryptocurrency's massive carbon footprint.

“Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing,” Gates told The New York Times. 

According to Digiconomist, a single bitcoin transaction uses roughly 707.6 kilowatt-hours of electrical energy. That is equivalent to the power consumed by an average U.S. household over nearly a month.


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