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Scattered global efforts to crack down on cryptocurrency exchange Binance were again on show on Friday after Malaysia censured chief executive Changpeng Zhao for “illegal” operations and the group also announced plans to close its European derivatives business.
Malaysia’s securities watchdog said it was launching an “enforcement action” against Binance’s Cayman Islands-incorporated holding company and a trio of its global affiliates. At nearly the same time, Binance announced it would “wind down” its lucrative derivatives business in Europe, where the company has also faced regulatory scrutiny.
Binance has been ordered by Malaysia to disable its main exchange, binance.com and mobile applications in the country within 14 business days from July 26. It must also immediately halt all media and marketing activities to local investors and stop them from accessing its popular Telegram chat channels.
“Investors are advised to stop dealing with and investing through [the] illegal [digital asset exchange]. Those who currently have accounts with Binance are strongly urged to immediately cease trading through its platforms and to withdraw all their investments immediately,” the Securities Commission Malaysia said in a notice posted on its website.
Malaysia’s intervention intensifies the global regulatory barrage that began when the UK’s Financial Conduct Authority last month issued an alert against the exchange, saying it was unauthorised to conduct regulated activities or cryptoasset operations in one of the world’s leading financial centres. Other key markets such as Japan, Hong Kong and Italy have also issued warnings about Binance.
Malaysia’s move stands out because it has specifically targeted Zhao, who goes by the moniker “CZ”, a Canadian-Chinese crypto mogul who former Binance employees say is based in Singapore.
Zhao was issued a “public reprimand” by Securities Commission Malaysia and was “specifically ordered” to ensure its demands related to disabling binance.com and related marketing are carried out.
He did not immediately respond to a request for comment. Zhao said at a press conference earlier this week that the exchange was seeking to beef up its compliance efforts “very aggressively”, including by placing compliance professionals in “very senior” positions.
The regulatory moves against Binance, and broader concerns about its practices to prevent money laundering and the financing of terrorism on its platform, have eroded its links to the financial system. Several UK banks have restricted customers from moving money to the exchange through their charge cards, while at least two payments partners, which provide crucial links between the crypto group and hard currency markets, have cut ties.
Several hedge funds have also told the Financial Times they are backing away from trading and other activities with the exchange in response to the accelerating crackdown.
Binance has also faced a backlash from retail traders who say they lost money on the group’s derivatives exchange, which allows traders to place huge bets with little upfront capital. Binance said on Friday it would wind down its futures and other derivatives products in Europe, beginning with Germany, Italy and the Netherlands.
Malaysia said the enforcement actions came after Binance continued to operate in the country despite being included in an investor alert list from July 2020.
In addition to Binance’s overall holding company, Malaysia’s enforcement action was also aimed at Binance Digital, based in the UK; Binance UAB in Lithuania; and Binance Asia Services in Singapore. All three of these entities are owned at least in part by Zhao, according to documents seen by the FT.