Recently, CNBC conducted an investigation into Binance, the world’s largest cryptocurrency exchange, and uncovered evidence suggesting that the company’s employees may be assisting Chinese users in bypassing the country’s strict cryptocurrency regulations. The probe involved examining translated messages from Discord servers and Telegram groups connected to Binance. Despite Binance’s claim that it does not operate in China after the 2021 trading ban, messages from official Chinese-language chatrooms revealed Chinese customers finding ways to evade Binance’s Know Your Customer (KYC) controls and conceal their true country of residence.
These Chinese customers used a variety of methods to circumvent Binance’s regulations. For example, they forged bank documents, created fake addresses, and exploited loopholes in Binance’s system. Astonishingly, some Binance employees and volunteer “Angels” reportedly provided video guides and documents, coaching users on how to falsify their country of residence to secure a Binance debit card and transform their crypto assets into a traditional checking account.
These findings raise serious concerns about Binance’s KYC and Anti-Money Laundering (AML) initiatives. Sultan Meghji, a professor at Duke University and former FDIC chief innovation officer, expressed his apprehension about the potential national security risks posed by Binance’s bypassing of KYC and AML requirements. Malevolent actors such as terrorists, criminals, and money launderers could potentially exploit these techniques. Meghji suggested that his concern level about Binance went from an eight out of ten to a ten out of ten.
Despite these revelations, Binance founder Changpeng “CZ” Zhao praised the exchange’s KYC systems and claimed that they represented a “billion-dollar effort” with advanced VPN detection tools. A spokesperson for Binance stated that the company’s employees were “explicitly forbidden” from assisting users in circumventing local laws and regulatory policies, with violations resulting in immediate dismissal or audit.
The investigation revealed that Binance has disallowed Chinese mobile phone registrations and blocked Chinese IP addresses since 2021. However, users were counseled to use VPNs to mask their locations and breach the Chinese domestic firewall. They were also advised to register as Taiwanese residents, switch their nationality back to Chinese, and avoid VPN nodes in the USA, Singapore, and Hong Kong to avoid potential domestic project restrictions.
Furthermore, the investigation uncovered a mirror platform hosted by Chinese giant Tencent that appeared to facilitate onboarding for Chinese customers using domestic phone numbers, although Binance denied any recognition of the platform. Other suggestions included registering email hosts in crypto-friendly countries, creating overseas companies for KYC purposes, and acquiring Palau digital IDs for use with remote mail-forwarding addresses in Austria, as well as fabricated bank statements created via PDF editors.
The investigation also found Telegram services that advertised forging financial documents as proof of address. These revelations raise questions about the source of funds, as financial institutions could perceive funds originating from Binance as suspicious.
In light of mounting concerns about Binance’s regulatory compliance and national security, investors and regulators must remain vigilant to safeguard the integrity of the crypto ecosystem. This news comes as oinbase">Coinbase faces an SEC lawsuit, despite years of demands for regulatory clarification and SEC participation in best-practice compliance.
