Binance Seals Loophole in Link Program Amid Global Regulatory Challenges
Summary:
Binance is ending a loophole in its Link Program that benefited leading brokerages through its multiple-tiered fee system. This crackdown on arbitrage strategies aligns with broader efforts by Binance to halt platform misuse. Amid these changes, Binance continues to face regulatory issues globally, underscored by former CEO Changpeng Zhao's $4.3bn settlement with the U.S. Department of Justice. The company is also grappling with regulatory challenges in the U.S., Nigeria, and India, emphasizing its commitment to compliance despite ongoing scrutiny.
Binance is sealing a loophole in its Link Program that enabled some leading brokerages to benefit from the multiple-level fee system offered by Binance. A recent report from Bloomberg highlighted that the premier brokerage partners of the service, spread across nine layers, reaped reductions on trading fees that could be arbitraged or relayed to their clients by merging numerous accounts and occasionally even trading on their behalf. This enabled several platforms to earn extra revenues by retaining the discrepancy between their unique top-tier price benefits and the fees they'd impose on their clients.
Platforms engaged in the Link Program could attract new clientele by passing on their savings to potential clients and proposing appealing trading fees not available on the standard market. Although this restriction on the arbitrage strategies used by some Link Program clients specifically targets institutional clients, it signifies broader efforts by the exchange to prevent exploitation of the platform.
On June 26, Binance issued an alert to platform users, urging them to disclose any suspicious activities, such as fee arbitrage or breaches of the Know Your Customer protocol by institutional accounts. To stimulate this, users will be compensated for reporting confirmed instances of policy transgressions and unscrupulous operators.
Despite facing regulatory challenges across jurisdictions, Binance continues to emphasize its dedication to compliance. The former CEO, Changpeng Zhao, reached a $4.3 billion settlement with the U.S. Department of Justice in November 2023 for alleged infringements of the Bank Secrecy Act and related Anti-Money Laundering regulations.
Binance.US, although separate from Binance, also confronts regulatory challenges from U.S legislators. In June, North Dakota's officials rescinded Binance.US' money transmitter license, effectively prohibiting the exchange's operation in the state. Amid allegations of tax evasion and money laundering from the Nigerian government, Binance agreed to withdraw from Nigeria earlier this year. The Nigerian government also blamed Binance for deficits in the local Nigerian currency.
The exchange platform was recently penalized $2.25 million by India's Financial Intelligence Unit for allegedly violating Anti-Money Laundering regulations in the country.
Published At
6/27/2024 8:27:42 PM
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