The biggest cryptocurrency exchange by trading volume Binance bans clients with Iranian IP addresses and plans to do the same with the clients from Belarus. On the one hand the exchange wants to add fiat currencies and therefore must follow the US policy and on the other hand Binance completely violates principles of decentralization.
Change of jurisdictions
Binance was launched in Hong Kong in 2017 by Changpeng Zhao but after implementation of Chinese ban on cryptocurrencies trading, servers and headquarter had been moved to Japan. Meanwhile in 2018 the biggest cryptocurrency exchange desired to change jurisdiction one more time.
On March, 2018 The Japanese Financial Services Agency asked the government to exclude crypto enthusiasts from the list of persons allowed for trading. On the other hand Binance needed agreement between the cryptocurrency exchange and banks concerning possibility to exchange cryptocurrencies into fiat. Joseph Muskat, Malta Prime-Minister, invited Binance after tightening the cryptocurrency legislation in Japan and China.
Binance’s CEO Changpeng Zhao indicated that “Malta is a progressive country speaking about blockchain technologies development and cryptocurrencies implementation therefore we are about to complete the agreement with local banks”. Thus, the Binance’s headquarter was moved to Malta.
The course towards fiat USD implementation
On June there appeared information that Binance is planning to add euro and USD to its platform. Such initiative demanded following the US policy including implementation of several financial sanctions.
On August Binance representatives denied the information of possible USD adding but BlackBall ICO agency experts indicate that the leading cryptocurrency exchange strives following the US legislation and moreover adds stablecoins that are supported by USD (True USD and Paxos Standard).
On November the exchange informed Iranian clients of ban implementation and asked to withdraw their assets as soon as possible. Then the same message was obtained by the Belorussian clients who were informed of terminating services in their country.
OFAC policy: much more clients are at risk
Binance strictly follows OFAC (Office of Foreign Assets Control) policy that implement economical sanctions towards various states or even alliances, based on the US foreign policy.
The list of countries under sanctions may be changed anytime. Moreover OFAC may implement several sanction packages towards one country. Nowadays the list of sanctioned countries includes the Balkans, Belarus, Burma, Ivory Coast, Cuba, DR Congo, Iran, Iraq, Liberia, North Korea, Sudan, Syria and Zimbabwe. In the nearest future Russian Federation may be also included into the list according to new packages of the USA sanctions.
Therefore Binance is expected to terminate services for all those countries violating all principles of decentralization. The ban implies denying of access for both clients with passport and ID address of a country that is included into list of sanctions.
The list includes countries where dictatorship regime is established according to the US government and using of cryptocurrencies nullifies the effect of sanctions.
Binance is losing trading volume
Ban implementation on trading has the other side. The leading cryptocurrency exchange may lose trading volumes. According to the chairman of Iranian Blockchain Association the daily volume of crypto trading in Iran reaches 300 BTC (about $10 million). In Belarus the official daily crypto trading volume is about 80 BTC (about $2.8 ml). According to Coinmarketcap Binance’s daily trading volume is 381 million USD therefore Iranian and Belorussian market are only 3.4%.
At the same time further bans may decrease trading volumes even more while the other cryptocurrency exchanges (e.g. Huobi) selected expansion towards Asian and African directions inviting new clients. On the other hand violating of decentralization principles by Binance crypto exchange may negatively influence the industry itself leading to increasing of OTC (Over-the-Counter) trading.
The USA and particularly SEC shows controversial attitude towards the cryptocurrency market creating significant obstacles against its development therefore following US economic policy means selecting unfriendly atmosphere towards the crypto industry in general.
Meanwhile Binance is not the only cryptocurrency exchange to maintain the US-centric policy. Coinbase and Gemini have chosen the same way.