As proof that things are not quite how they are advertised, Binance has unexpectedly blocked residents of certain countries from using its services.
Binance hasn’t clearly explained why it did this, but users suspect it relates to UNSC or US Treasury’s OFAC sanctions. Indeed, the majority of the blocked countries are on the US Treasury’s OFAC list. Thus, it seems Binance wants to comply with US laws. However, it’s strange that the exchange has blocked users from countries that are under selective sanctions.
Why would Binance cater to the US Treasury?
The US Treasury is notorious for many reasons. The last time we checked, there were around five Bosnians and 200 Serbs on the OFAC list, including Yugoslavia’s former president, Slobodan Milosevic. Milosevic died in 2006, but he was still on the list a decade after his death. And he’s not the only long-deceased person on the OFAC list. That shows how carefully the US government updates this list.
That’s not the only embarrassing oversight on the list. It seems the US Treasury doesn’t bother to name specific Balkan countries (of which there are more than 10). Instead, it lists the whole Balkan peninsula as one country.
But let’s leave the professionalism of US Treasury aside and see what Malta’s law has to say about complying with the US. After all, the world’s most popular cryptocurrency exchange, Binance, registered itself in Malta to avoid restrictive legislation.
According to Eversheds Sutherland, unlike UN sanctions:
US sanctions are not legally binding in Malta, but the MFSA encourages companies and the public in general to take US sanctions into consideration when conducting business activities.
Yup, not binding. Just advisable. So, why the rush, Binance? It’s not like these sanctions are new or appeared suddenly.
If we put aside the fact that Binance wasn’t even bound to comply, the question remains: Why do this in such an unprofessional manner?
Binance: No proper warning
Even though there was no proper announcement, the exchange notified some of the affected users that they stopped providing services to them.
Many users left in the dark
Many of the affected users never received any notification from Binance, the author of this article included. That means all those Belarussians, Serbs, Bosnians, and others who didn’t know about the change or didn’t have time to withdraw their funds are in a hopeless situation. Their funds now belong to Binance, and it seems there’s nothing they can do about it.
Maybe this poor communication was Binance’s clumsy attempt to downplay the ban. Nevertheless, the result of this mess is which Binance now has control of our property.
Furthermore, the debacle has raised suspicions that the exchange was under pressure to impose a ban.
The rise and fall of crypto hubs
Some jurisdictions that were once popular places to register blockchain companies have since fallen off the radar. The US Securities and Exchange Commission (SEC) has played a major role in the fall of many “blockchain paradises.” The SEC showed how far its reach extends when it charged futures company 1Broker, registered in the nuclear-ravaged Marshall Islands. Since then, the Marshall Islands have become less attractive to crypto entrepreneurs.
Zug and Malta became famous this year as crypto-friendly jurisdictions. But, as cryptocurrency legislation expert Jake Chervinsky noted, even those jurisdictions that seem beyond the reach of US agencies might want to watch their backs:
Can't speak to Bitmex/Binance specifically but Malta/Seychelles are not off-limits. The US gov't has ways to intervene in both through legal & geopolitical methods. For example, Malta is an EU member & Seychelles is FATCA-compliant. US can also pressure UK, which has more access.
— Jake Chervinsky (@jchervinsky) September 28, 2018
By blocking countries that appear on the US Treasury’s list, Binance has tarnished the “Malta as an independent blockchain hub” story. Now it seems businesses registered on the island are afraid that the US can “reach” them.
Binance: Funds not Safu