The Brazilian Securities and Exchange Commission (CVM) has opened an investigation into global cryptocurrency exchange Binance, amid allegations that the company provided advice to clients to circumvent stop-loss restrictions. . This signals increased scrutiny of Binance operating in Brazil, as regulators seek to enforce local rules and regulations.
Is Binance in hot Brazilian water?
Binance, the world’s largest cryptocurrency exchange, is under investigation in Brazil by the Federal Prosecutor’s Office and Federal Police, as reported by Valor Econômico newspaper. The platform is accused of helping clients evade a stop loss order imposed on cryptocurrency derivatives investments.
The Brazilian Securities and Exchange Commission (SEC) has informed the Attorney General of the State of São Paulo that Binance may have persisted in offering cryptocurrency derivatives to its customers, despite the SEC issuing a stop order on these offerings in 2020. Under Brazilian law, futures contracts are considered securities, regardless of the nature of the underlying assets.
According to the newspaper, the SEC provided police with screenshots from August 2021, revealing instructions for Brazilian users to change their language settings in order to access the Binance Futures section. The SEC also pointed to the abundance of content in Portuguese, with no notice of restrictions for Brazilian users.
As Binance comes under increased scrutiny from Brazilian authorities, the exchange’s operations in the country could be significantly affected. If the investigation confirms claims of helping customers evade shutdown order restrictions, the company could face substantial fines or even suspension of its license to operate in Brazil.
Binance continues to come under regulatory fire
The Brazilian investigation is another setback for Binance as it strives to establish a more compliant presence in various jurisdictions. The company recently took steps to improve its regulatory compliance by hiring former regulators and industry veterans on its management team. However, current regulatory challenges underscore the difficulties crypto platforms face in balancing innovation and growth with the need to adhere to established rules.
In a statement, Binance stressed that it “does not offer derivatives in Brazil” and operates in accordance with local regulations. The exchange also affirmed its commitment to maintain a continuous dialogue with the authorities to accelerate the growth of the crypto and blockchain sectors in Brazil and around the world.
This is not the first time Binance has faced such allegations. The exchange continued to operate in the Canadian province of Ontario for months after notifying the Ontario Securities Commission that it would cease operations there. In February, Binance reportedly acknowledged that it was working with US regulators to resolve compliance issues. Additionally, in March, the company was sued by the US Commodity Futures Trading Commission for alleged trading violations.