The world’s largest cryptocurrency exchange has officially announced that they will be taking formal steps to eliminating money laundering on the platform. Binance will be cooperating with Chainalysis to make this happen.
For many years, the mainstream media has associated cryptocurrencies with money laundering due despite the fact that privacy protections don’t exist on Ethereum or Bitcoin: it’s all on a public ledger. Regardless, Binance is looking to change this narrative directly be establishing clear, anti-money laundering practices.
Although Binance is not legally required to adhere to these standards, they recognize that, as the largest exchange in the world, they have this responsibility to the cryptocurrency community. After all, Binance is the face of cryptocurrency trading.
Binance is likely rolling out these new AML standards in light of their future plans to include fiat-based trading for cryptocurrencies on their platform. The news comes at the same time that Binance has announced that Vertex Ventures will be providing the strategic investment for their fiat-crypto exchange. Binance is looking to establish this exchange in SIngapore, as a new subsidiary of the Hong Kong-based exchange.
The CEO of Binance, CZ, has said that the new fiat-crypto exchange will be operational by the end of this year. However, before they are able to make such a release, CZ has made clear there must be some level of AML and KYC requirements in check first. This is where Chainalysis comes in.
A New Cooperation
Binance has announced that they would be working with Chainalysis, which is a blockchain-based company that monitors AML, KYC, and suspicious transactions on the network.
Chainalysis has been around for some time and has even provided their services to the IRS for tracking illicit Bitcoin transfers. Forming in 2015, the company has been providing financial institutions with an API that enables them to estimate where cryptocurrency transactions are coming from. They’re able to do this by tagging wallets and addresses through their system, creating a database of many addresses and transaction logs that they then map into a security system.
Binance enlisted Chainalysis to improve its AML system. AML is harder to monitor on Binance since the exchange still does not require KYC to trade on its platform, and it will likely stay this way to keep the exchange open for all.
In regards to the announcement, Jonathan Levin, co-founder and COO of Chainalysis, said:
“Cryptocurrency businesses of all sizes face the same core challenge: earning the trust of regulators, financial institutions and users. We expect many to follow Binance’s lead to build world-class AML compliance programs to satisfy regulators globally and build trust with major financial institutions,”
AML compliance can only work to the cryptocurrency space’s benefit. They also provide the legitimacy for cryptocurrencies to be treated as a recognized asset class and digital market.
Wei Zhao, the CFO of Binance, had this to say on the recently-announced cooperation between his exchange and Chainanalysis:
“By working with Chainalysis, we are able to continue building a foundational compliance program that enables the next phase of our growth. Our vision is to provide the infrastructure for a blockchain ecosystem and increase the freedom of money globally, while adhering to regulatory mandates in the countries we serve.”
The cryptocurrency space has historically gotten much flak over its supposedly lax money laundering restrictions. However, when we look at existing banks today and how they operate, the spotlight on cryptocurrencies in this regard seems silly. Just this year, it was found that Danske Bank laundered some $243 billion from criminal groups. In 2012, HSBC, Europe’s biggest bank, was found guilty for being the conduit for close to $900 million in illicit funds for illegal drug sales. And these are not the only examples.
The reality is that institutional banks have been laundering money since their inception because there exists no clear way to track funds. With fiat, it is rendered much more difficult by its lack of a paper trail. However, with blockchain technology, all transactions are all on a public ledger. Although there are some concerns over privacy, the case must be made clear: cryptocurrencies and blockchain technology actually makes it easier to stop money laundering. The conflation between money laundering and cryptocurrencies needs to be put to rest.
Hopefully, with the new partnership between Binance and Chainanalysis, we can see these false public perceptions against cryptocurrencies finally begin to change.