By
Chimamanda U. Martha
April 25th, 2024
The investigation is notably hinged on the “classification of retail clients and wholesale clients“ in what it said will be a targeted review.
The Australian Securities and Investments Commission (ASIC) has announced it will be opening an investigation into Binance Exchange’s local operations in the country. The targeted investigation was prompted by the exchange’s wrong closure of some users’ derivatives accounts based on a faulty classification.
Binance, which has a local Australian unit, acknowledged the error on Thursday after some of the affected users came on Twitter to share their grievances.
“Our team identified a small number of Australian users who were incorrectly classed as ‘Wholesale Investors’ on Binance. As per Australian regulation, we were required to inform these users and close any of their own derivative positions with immediate effect,” the exchange said in an announcement. The exchange later said a total of “500 users were affected by this remediation, which was a necessary action to ensure we stay compliant with local laws. We serve over 120 million users globally and every user is important to us. We are in contact with the affected users to firm up our compensation plans for them.”
Despite the swift update from the trading platform, an ASIC spokesperson said the trading platform has not informed the regulator of the recent jam in its system.
“It has not yet reported these matters to ASIC in accordance with its obligations under its Australian financial services license.”
The investigation is notably hinged on the “classification of retail clients and wholesale clients“ in what it said will be a targeted review. There is no indication as to whether the trading platform will be made to pay any form of fine at this time.
Binance CEO Changpeng “CZ” Zhao said every affected trader will be compensated for their losses and encouraged members of the community to shun every form of FUD that may arise following the incident.
ASIC Review of Binance Shows Exchange Scrutiny Is Rising
The broader digital currency ecosystem has experienced a very significant trust displacement over the past year owing to the recent collapse of the FTX Derivatives Exchange.
With the ordeal most of these industry stakeholders have passed through, the zeal of regulators has grown as the need to protect consumers is higher than normal. While Binance remains the biggest trading platform by daily trading volume, the exchange is still the one that faces the most backlash from members of the press.
The exchange has been accused of aiding money laundering activities as well as aiding the use of its platform by sanctioned users from regions like Iran. This FUD may account for the swift opening of investigations by ASIC as the regulatory would like to cover all bases before there is a contagion.
Following this incident, Binance has acted transparently and signs that this will be treated as a minor hiccup in its operations have already started showing forth.