Key Takeaways
- BaFin expressed reservations about Binance CEO Changpeng Zhao, also known as “CZ,” passing the “fit and proper” test under their regulatory framework.
- Binance has withdrawn its application for a crypto license in Germany following reports that BaFin had denied the exchange a crypto custody license.
In a recent development, Germany’s financial regulator, the Federal Financial Supervisory Authority (BaFin), advised Binance, a major cryptocurrency exchange, to withdraw its license application due to concerns surrounding its founder and the company’s complex organizational structure.
According to The Wall Street Journal’s report on July 28, BaFin expressed reservations about Binance CEO Changpeng Zhao, also known as “CZ,” passing the “fit and proper” test under their regulatory framework. The guidelines dictate that managing directors, such as CZ, in this case, must possess the necessary professional qualifications and a reputable character to effectively manage a financial institution while dedicating sufficient time to their roles.
Earlier this week, Binance withdrew its application for a crypto license in Germany following reports that BaFin had denied the exchange a crypto custody license. The exchange’s CEO, Changpeng Zhao, stated that the company would now focus on achieving compliance with the European Union’s Markets in Crypto-Assets (MiCA) regulations, aiming to offer its services in European countries.
Binance had also recently withdrawn license applications in Austria, the Netherlands, and Cyprus, and last month further lost its partnership with European banking partner PaySafe. BaFin’s concerns went beyond the suitability of CZ, as they also highlighted issues with Binance’s corporate structure hindering effective regulatory supervision.
This development comes at a time when Binance faces increasing regulatory scrutiny globally. In the United States, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance for allegedly failing to register its Binance.com platform as an exchange or a broker-dealer clearing agency. The company is also under investigation in France since early 2022.
Moreover, Binance is grappling with a lawsuit from the Commodity Futures Trading Commission (CFTC), which has accused the exchange of exceeding its regulatory authority and engaging in regulatory overreach.
Binance asserts that the CFTC is attempting to regulate foreign entities operating outside the United States, a move that, according to the exchange, goes beyond the limits of the CFTC’s statutory jurisdiction and disregards well-established principles of comity with foreign sovereigns.
