Binancethe largest cryptocurrency exchange by trading volume, allegedly circumvented US sanctions onIran for years. This is reported by an investigation by the press agency Reuters released July 11. Many Iranians were able to continue using the company’s services after Donald Trump implemented a new embargo in 2018.
A complex structure
Founded in 2017 by Changpeng Zhao, a Chinese-Canadian businessman, Binance became the largest cryptocurrency platform in the world in 2018. With 1,678 digital assets available for exchange, it ranks far ahead of its competitors. For comparison, FTX, its competitor located in the Bahamas ranked second according to Coinmarketcaponly supports 420.
The particularity of this company based in the Cayman Islands is that it is made up of several entities. Its main branch, Binance.com, is not authorized in the United States. Instead, Americans have access to Binance.us, a subsidiary of the exchange platform which remains under the control of Changpeng Zhao, the chairman and CEO. According to lawyers interviewed by Reuters, this structure shields Binance from sanctions after Donald Trump reinstated the ban on US companies doing business with Iran. As a reminder, in 2015, Tehran had reduced its nuclear program in order to benefit from a reduction in certain sanctions, in particular commercial ones.
Thus, Iranian traders would have taken advantage of Binance’s main exchange, which is not an American company, to carry out their transactions. The company of the billionaire, nicknamed “CZ” in the world of cryptocurrency, nevertheless exposes itself to some secondary disciplinary measures. They help prevent foreign companies from doing business with sanctioned countries. These can damage Binance’s reputation and block its access to the US financial market.
Binance was doing half measures
Binance has become extremely popular in Iran. Asked by Reuterss, a trader from Tehran by the name of Asal Alizade indicated that “ there were a few alternatives, but none were as good as Binance. No ID verification was needed so we all used it “. Until last September, Iranians could create a Binance account using a simple email address. No additional document was requested from them to prove their identity.
Employees of Changpeng Zhao’s company were aware that their platform was growing visibly in Iran. They were also fully aware that this could pose a problem for the American authorities. Longtime employees joked about the Binance hype with Iranian Instagram users, dubbing them “IRAN BOYS.” In 2019, Binance ranked Iran among the “5 heavily sanctioned countries” alongside Cuba, Syria, North Korea and Crimea. A year later, he joined a list of banned countries labeled “strictly no”.
However, the company has not made its services unavailable in Iran. In particular, the company encourages the use of VPNs in order to circumvent territorial prohibitions. Mehdi Qaderi, business development officer, explained to Reuters that he used a VPN to trade $4,000 worth of cryptocurrencies in the year 2021. He adds that “ all Iranians used [de Binance] “. In July 2021, the platform published a beginner’s guide to learn how to use a VPN.
It was not until last November that Binance permanently suspended its services in Iran, after having informed its Iranian users to liquidate their assets as soon as possible. A company spokesperson told Gizmodo that ” [Binance] has implemented a globally recognized compliance and regulatory program. […] This industry-leading sanctions program is fully compliant with all international financial sanctions, including blocking access to the platform for users located in Iran, North Korea and other sanctioned countries “.
Chagri Poyraz, Head of Sanctions at Binance, affirms that access to these countries has been interrupted ” because we believe in respecting international sanctions laws “. For the moment, no legal sanction has been taken against the platform whose the American branch continues to grow.