The United States Securities and Exchange Commission is investigating whether Binance Holdings broke securities rules when it launched its BNB token in an initial coin offering (ICO) five years ago, Bloomberg reported on Monday.
Binance is the world’s largest crypto exchange, and BNB is the fifth-largest cryptocurrency.
The BNB ICO took place in July 2017 on several platforms during the height of the so-called ICO boom, and the Binance exchange opened just days afterward. According to Bloomberg, citing unnamed people familiar with the matter, at least one U.S. resident claimed to have taken part in the ICO, which could be a crucial fact for an SEC case, if the agency chose to pursue one. The SEC has claimed most cryptocurrencies are securities and brought cases against a number of ICO projects.
Binance founder and CEO Changpeng Zhao, often known as “CZ,” said in a 2020 blog post that the wording of the BNB white paper was changed in January 2019 because “the potential for being misunderstood as a security is higher in certain regions.” Binance’s American arm, Binance.US, was created later that year.
Also on May 6, Reuters published a lengthy special report alleging that Binance processed at least $2.35 billion of transactions from hacks, investment frauds and narcotics sales between 2017 and 2021, and had weak Know Your Customer (KYC) and Anti-Money Laundering (AML) protections for those years.
Among other cases, Reuters mentions the hacking of Eterbase, with some of the proceeds being laundered through Binance by North Korean hacker group Lazarus, and Binance’s association with Russian-language drug mart Hydra.
A Binance spokesperson disputed Reuters’ findings, and the exchange told Forbes in a statement that the report is a “woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations.”
Binance is already the object of several U.S. federal investigations, including another SEC probe. The U.S. Commodity Futures Trading Commission began an investigation of the exchange’s trading practices last year.
Binance Markets, its United Kingdom branch, was ordered by the Financial Conduct Authority to cease activities in that county after a review of its operations last year. Additionally, Binance was ordered to cease operations in Ontario last June, although it remained active in the Canadian province until March of this year.
Affluent investors in Asia are neither shy nor ignorant about crypto, with research revealing that 52% of them held some form of a digital asset during Q1 2022.
According to research from Accenture published on Monday, digital assets, which include cryptocurrencies, stable coins and crypto funds, made up, on average, 7% of the surveyed investors’ portfolios, making it the fifth-largest asset class for investors in Asia.
This was more than they allocated to foreign currencies, commodities and collectibles, and in some cases, was on par with or exceeded the amount invested in private equity/venture capital and hedge funds.
Accenture said the survey was conducted with more than 3,200 clients across China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore and Thailand. The company defines an affluent investor as anyone that manages investable assets of between US$100,000 to $1 million.
Investors in Thailand and Indonesia had the largest percentage of digital assets in their portfolios compared to their peers.
Though half of the investors in Asia were already holding digital assets in Q1 2022, Accenture’s research indicates that a further 21% are expected to invest in them by the end of 2022, meaning as many as 73% of wealthy Asian investors could hold a digital asset by the end of the year.
“Digital assets represent a rare, clear industry white space with significant business opportunity.”
Wealth managers holding back
However, the firm found that wealth management firms, those that provide financial planning, tax, investment advice, and estate planning to their clients, have been slow to board the crypto train. Sixty-seven percent of wealth management firms said they have no plans to offer digital asset products or services.
“For wealth management firms, digital assets are a US$54bn revenue opportunity— that most are ignoring."
Wealth management firms cited a lack of belief and understanding of digital assets, a wait-and-see mindset and the operational complexity of launching a digital asset offering as the main reason for holding back, leading them to prioritize other initiatives instead.
Japan’s Justice Ministry is reportedly considering a revision of an asset seizure law relating to organized crime to include a stipulation that crypto can be commandeered in such instances.
If the reports are found to be true, a potential revision of the Act on Punishment of Organized Crimes and Control of Proceeds of Crime (1999) would enable law enforcement officers and courts to take control of crypto assets used in criminal activity such as money laundering.
According to reports from local media outlets such as the Yomiuri Shimbun on Saturday, the Justice Ministry will first need to engage in talks with the Legislative Council on the issue before proceeding forward. While it will also need to iron out important details such as how officers can go about obtaining a criminal's private keys.
The talks with the Legislative Council could go ahead as soon as next month, according to the Jiji Press.
As the specific law focused on the seizure of funds/assets from organized crime does not explicitly outline any procedure concerning illegally acquired cryptocurrencies, there is a concern that criminals may be able to continue illicit behavior via their unseized digital asset holdings.
As it stands, the law only outlines that the type of assets that can be seized are physical property, monetary claims, and movable assets such as machinery, vehicles, tools, and supplies, with crypto falling under none of those categories.
Once the finer details have been set, the amendment to the law would need to be approved by the cabinet and then signed off by parliament, and may not meet much resistance, given the nature of such a proposal.
The report comes just days after Japan’s parliament passed a bill to ban stablecoin issuance by non-banking institutions as part of a push to reduce system risk and provide greater consumer protection.
Under the bill, only licensed banks, registered money transfer agents and local trust companies can develop and issue stablecoins.
This Daily Dose was brought to you by Cointelegraph.