Oct 10, 2023

US Authorities Use Geopolitical Tensions to Crack Down on Crypto Compliance Failures

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In a world of mounting geopolitical tension, authorities may take the opportunity to crack down on cryptocurrencies used to facilitate illegal transactions. With conflict escalating in the Middle East, the U.S. appears poised to take a hardline stance against protocols accused of assisting sanctioned entities and terrorist organizations.

Binance, a major exchange, has become a prime target amidst the geopolitical turmoil. The Department of Justice has been investigating the exchange for a while for various reasons, and it’s currently looking into whether Binance allowed Russians to evade sanctions imposed after the invasion of Ukraine. Years ago, internal messages revealed the platform permitted transactions by Hamas, a designated terrorist group now engaged in war.

These compliance failures have led U.S. regulators to file lawsuits against Binance. The CFTC (Commodity Futures Trading Commission) accused the exchange of “willful evasion of federal law”, and exposed conversations in which Binance executives acknowledged some users were on the platform "for crime."

Now, with the conflict worsening in the Middle East, authorities have the perfect opportunity to crack down on the exchange, for failing to restrict Hamas and sanctioned Russians. The U.S. may be more determined to block sanctioned organizations from accessing the financial system, both traditional and crypto.

Binance's failure has provided the ideal opening for regulators to make an example. A criminal conviction could result in hefty fines, bans from operating in certain jurisdictions, and even jail time for executives. The mounting legal pressure serves as a warning to the wider crypto industry. Exchanges can no longer turn a blind eye to illicit usage.

As global tensions rise, U.S. authorities will take swift action against platforms that disregard compliance standards. The crypto sector must rapidly implement controls to detect transactions by sanctioned entities and prevent the financing of terrorism. Those that fail to comply face severe consequences.

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