- The exchange made an abrupt change recently, closing the accounts of some of its users in Australia.
- Although the platform claims it was correcting wrongly classified accounts, the regulators are not happy.
On February 23, Binance suddenly announced that it had identified some of its users in Australia whose accounts were wrongly identified as ‘wholesale Investors’; as a result, it was closing down their respective accounts with immediate effect. The abrupt announcement was not well-received by the crypto community and the regulators.
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In part, the announcement, which was widely shared on social media, read: ‘‘in January 2023, Binance Australia Derivatives commenced an investigation into its onboarding process. Because of that investigation, we identified users incorrectly classified as Wholesale investors. As a consequence, we will close any of their derivatives positions with immediate effect.’’
The regulators’ concerns
The Australian Securities and Investments Commission (ASIC) was not amused by the step, later announcing that it would start a targeted review of Binance’s local derivatives operations, including the firm’s alleged ‘‘classification of retail clients and wholesale clients.’’ ASIC maintains that such a step ought to have been communicated earlier.
‘‘Binance has not yet reported these matters to ASIC per the obligations under its Australian financial services license,’’ a representative from ASIC said, adding that it was aware of the social media posts by the exchange – which went viral after the platform posted the screenshots of the account closure on Twitter.
In defense, Binance CEO Changpeng Zhao ‘CZ’ said that all the affected users would be compensated for any losses incurred during the forced closure, urging users to ignore the FUD (Fear, Uncertainty, and Doubt.) Further, CZ added that the step was made to ensure that the exchange complies with local laws. He added that his exchange was mulling the possibility of reopening the futures offering in Australia.
Since the epic collapse of FTX, Binance has been under the spotlight from regulators across the globe – mostly to avert a similar incident. For instance, in the US, the platform is under probe by the Securities and Exchange Commission, Commodity Futures Trading Commission, DOJ, and the Internal Revenue Services. Specifically, its derivative business has been scrutinized, being considered much riskier in the crypto space.
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