Binance Case Sparks Debate on Crypto Regulation: Double Standards?



by FARUK IMAMOVIC

Binance Case Sparks Debate on Crypto Regulation: Double Standards?
© Getty Images News/Michael M. Santiago

The recent developments involving the crypto exchange Binance have reignited discussions about the United States' regulatory approach towards cryptocurrency firms. Omid Malekan, an author and adjunct professor at Columbia Business School, has raised significant points of contention regarding how the crypto industry is being treated compared to traditional finance.

A Different Yardstick for Crypto?

Malekan, in his comments on X (formerly known as Twitter), suggested that the crypto industry is being held to a different standard than traditional financial institutions. He argued that while companies in the traditional finance sector also process large sums of illicit funds, they are often given a pass as long as they adhere to Anti-Money Laundering (AML) regulations and complete necessary paperwork.

This disparity, according to Malekan, is evident in the recent case involving Binance.

He further stated that if Wall Street firms were subjected to the same scrutiny as Binance, the outcome would be drastically different.

“If they’d been held to the Binance Standard there’d be hundreds of managing directors in jail and less money for shareholder buybacks (or lobbying),” Malekan asserted. This comparison underscores a perceived inconsistency in how regulatory measures are applied across different sectors of the financial industry.

Binance's Settlement and Controversy

The debate around Binance intensified following its settlement with the U.S. government. The exchange, along with its co-founder Changpeng “CZ” Zhao, was accused of allowing individuals involved in illicit activities to transfer “stolen funds” through the platform.

As part of the settlement, CZ stepped down as CEO, marking a significant turn in the company's operations. Despite his criticisms of the regulatory approach, Malekan acknowledged that Binance was at fault for misleading its customers and failing to comply with certain regulations.

This admission highlights the complexity of the situation, where the exchange's actions are being weighed against broader regulatory practices in the financial sector.

Binance's Role in Financial Inclusion

In his commentary, Malekan also commended Binance for its role in promoting financial inclusion.

He noted that the exchange had successfully integrated tens of millions of economically disadvantaged and underprivileged individuals into the financial system, a feat that many compliant financial firms have struggled to achieve.

This aspect of Binance's operations offers a different perspective on the exchange's impact, beyond the controversy and legal battles it currently faces. The ongoing discussions around Binance and the broader cryptocurrency sector reflect the evolving nature of financial regulation in the age of digital currencies.

As the industry continues to grow and intersect with traditional financial systems, the debate over equitable and effective regulatory practices is likely to remain a focal point.

United States