Binance mandates prime brokers to ramp up data collection, U.S. investors sidestepped

Binance has imposed stricter client screening procedures upon its prime brokers, such as Hidden Road and FalconX.

According to a Bloomberg report on March 19, the strategy is designed to prevent U.S. investors from accessing its trading platform. The screening enhancements are tailored for prime brokers that primarily serve institutional investors. 

These brokers are now required to gather comprehensive client data, including information about the geographical locations of the clients’ offices, as well as specific facts about the founders and staff. Furthermore, clients must confirm the accuracy of this information, guaranteeing the reliability and integrity of the data.

“Binance is fully committed to compliance and has made public how it assesses end users who can access the Binance platform. By making its standard transparent, Binance gives clarity to enterprises who want to access its market-leading liquidity,” a Binance representative told Crypto.news.

Moreover, the representative highlighted the “Binance Link Program,” an initiative aimed at enhancing trading and connectivity services for businesses, including brokers, exchanges, and automated trading platforms. Although the Binance Link Program’s main objective is to increase trading and connectivity options, its underlying architecture could assist brokerages in complying with the exchange’s more stringent screening procedures.

The context of these actions is the admission of Bank Secrecy Act violations by Binance and its former CEO, Changpeng Zhao. Consequently, Binance was hit with a hefty $4.3 billion fine by the U.S. Department of Justice due to their alleged participation in money laundering, fraud, and sanctions breaches. Zhao was blasted by the Department of Justice for deliberately focusing on American clients while dodging U.S. regulations.

In addition, Binance has recently updated its token listing guidelines, implementing a more extended “cliff period” for new tokens and requiring security deposits and token reserves for market makers. By extending the initial six-month threshold to a minimum of a year, these steps seek to stabilize the market for newly launched tokens.

Against this backdrop, Binance Labs, Binance’s venture capital arm, has established itself as a separate company from the Binance group. This separation was first announced discreetly on the Binance Labs website, later reported by Bloomberg on March 15. According to Investment Director Alex Odagiu, Binance Labs will continue operations under the Binance brand based on a licensing agreement.