Binance concealed significant links to China for many years. This contradicts executives’ claims that Binance left China in 2017 after an industry clampdown.
Changpeng Zhao, the chief executive, and other senior officials repeatedly told Binance employees that they should hide their Chinese presence. This included a Chinese bank used to pay some salaries and an office that was in use up until the end of 2019.
“We have stopped publishing our office addresses. . . People in China can easily say that our office does not exist,” Zhao stated in November 2017 in a company messaging group.
These documents show how Binance, the largest crypto exchange in the world, sought to hide the location and extent of its operations while regulators scrutinise crypto activity. Zhao stated that most Binance employees, except for a few customer service agents, left China in 2017 after China tightened its controls on crypto.
US regulators sued the exchange Monday for allegedly illegally serving American clients.
Binance was also accused by the Commodity Futures Trading Commission of “intentionally” not disclosing the location of its executive office. It was further alleged that statements that its headquarters were wherever Zhao was located reflect “a deliberate approach in an attempt to avoid regulation.”
Employees at the company discussed a report by media that Binance wanted to open a Beijing office. One message stated, “Reminder: publically, we have offices at Malta, Singapore,, and Uganda.” “Please don’t confirm any other offices, even China.”
Binance stated in a statement that it was regrettable that anonymous sources were citing crypto-historical history and mischaracterizing events. This is not a true picture of Binance’s operations.
Zhao has denied publicly that Binance is Chinese. He even wrote a blog last year in which he claimed that only “small numbers” of Binance customer service agents remained in China in late-2018. Although he was born in China and has Canadian citizenship since he moved to Canada as a youngster, the Binance chief is Canadian.
Binance stated that “the original founding team members, who were based in Shanghai, left China only two months after the company’s organization was organized, and before the company was even incorporated due to crackdowns on China’s crypto industry.” Binance also said that the exchange had never been registered or incorporated by China.
Binance US, is currently under scrutiny by Washington because it proposed to purchase assets from Voyager Digital, a US-based bankrupt crypto lender. The Committee on Foreign Investment in the United States is currently reviewing the acquisition. This government agency determines whether overseas investments pose national security threats.
“The United States is involved in one of the most important geopolitical battles in history. Cfius will be concerned about any deal that links back to China if the government attempts to influence this new form of finance,” said a former Cfius official.
Binance stated that its US affiliate licenses technology from its parent, but it is an operationally separate entity. There are links between them, even with Zhao, Binance US’s ultimate beneficial owners.
Binance stated, “To be clear: the Chinese government, as any other government has no access to Binance information except where we are responding lawful and legitimate law enforcement request.”
Documents from within the company reveal the importance of China to Binance, even though the country has tightened its crypto regulations in 2017. Employees were informed that wages would be paid by a Shanghai bank in 2018, in 2018. One year later, Chinese employees were told that their wages would be paid through a Shanghai bank.
Binance employees shared information on a Shanghai passport processing office. They instructed that non-Shanghai residents must have paid one year of social security in Shanghai before they can apply.
A second employee was open to suggestions for a Shanghai-based recruiting team in the middle of 2018. The person stated, “Hope everyone enjoys working here.” A senior employee warned the group weeks later: “Please do not wear any clothing or accessories featuring Binance logos near our offices.” It is strictly forbidden.
According to documents, an office in Shanghai was used by employees for training sessions and other events. Two years after Zhao stated Binance had left China, the company continued to hire staff in Shanghai. These included a data analyst as well as a clearing specialist.
Binance also went to great lengths in disguiseing its Chinese presence by using virtual private networks. This software hides the location of users to gain access to services.
Onboarding documents from Binance employees instructed Chinese-based newcomers to install VPNs. Monday’s CFTC lawsuit also claimed that Binance told US customers to use VPNs in order to hide their location.
One Binance employee said that there were many non-Shanghai workers that visit Shanghai office often and that it would be difficult to exclude them. This was in November 2019, when Binance was looking to open a Shanghai office admin chat group.
Although Thy couldn’t determine if the offices mentioned in company communications up to 2020 were still being used, one former employee claimed that many of the company’s top developers still resided in China.
Binance stated that it does not have technology or servers in China and did not operate there.
The People’s Bank of China (and other regulators) have issued a ban on banks processing bitcoin transactions. They cite its potential use in money laundering. After the central bank orders payments processors to cease conducting transactions with them, leading Chinese crypto exchanges will no longer accept renminbi deposits.
The PBoC announced an immediate ban on initial coin offering, describing the issuance of and sale of these tokens as “essentially an unapproved and illegal act of public financing”. Local media reports that more than 60 cryptocurrency exchanges were targeted by investigation. Many exchanges based outside China also move overseas in an effort to avoid being shut down.
According to state media, authorities will restrict access to 120 foreign cryptocurrency websites after crypto users migrate from mainland China to offshore exchanges.
China’s cabinet releases a draft list of “unsafe,” wasteful, or polluting industries that will be eliminated. This includes mining bitcoins and other cryptocurrencies. The final list was published in November.
The State Council demands a crackdown against bitcoin mining and trading. This will culminate in November when the central bank and other regulators ban all Chinese citizens from engaging in any form crypto transactions, trading, or investment.