Binance Holdings Ltd, the world’s largest digital asset exchange, has recently disclosed that it is under investigation by the Ontario Securities Commission (OSC), one of Canada’s securities regulators. The OSC has ordered an investigation into whether Binance attempted to bypass local regulations and compliance controls while seeking approvals in Canada. This development follows Binance’s withdrawal from the Canadian market, citing new regulatory guidance related to stablecoins and investor limits.
The investigation order from the OSC grants broad authority to examine Binance’s compliance with Ontario securities law and its overall conduct. Binance has faced increasing regulatory scrutiny in multiple jurisdictions in recent years, and this investigation adds to the growing legal challenges it is facing.
OSC Investigation Order and Binance’s Withdrawal from the Canadian Market
On May 10, the Ontario Securities Commission served Binance with an investigation order, triggering an examination into the platform’s potential circumvention of Ontario securities law and compliance controls. Binance disclosed this development in a filing with the Capital Markets Tribunal. Two days after receiving the order, Binance announced its decision to withdraw from the Canadian market. The company cited the implementation of new regulatory guidance regarding stablecoins and investor limits as the reason behind its withdrawal.
Binance’s legal representation, Borden Ladner Gervais LLP, stated that the OSC’s order authorized a wide-ranging inquiry into Binance’s conduct and compliance with Ontario securities law. The order also acknowledged the lawsuit filed against Binance and its CEO, Changpeng Zhao, by the US Commodity Futures Trading Commission (CFTC) as a basis for investigation. However, the specific details of the order were not publicly available at the time.
Changpeng Zhao, a Canadian citizen, addressed the decision to withdraw from the Canadian market in a Twitter Space session. He stated that operating a viable business in Canada became financially impractical after enforcing new regulations.
OSC’s Investigation and Binance’s Response
Following the investigation order, the OSC sent a summons to Binance, requesting the submission of relevant documents for the investigation. Binance claimed that it could not comply with the summons due to the lack of specificity regarding the required information. However, during a hearing on May 26, the Capital Markets Tribunal ordered Binance to comply with the summons. A subsequent filing confirmed the tribunal’s decision.
Binance’s spokesperson expressed discontent with the OSC’s investigation order, characterizing it as an attempt to access vast amounts of private data with the hope of finding incriminating evidence. The spokesperson viewed the order as unjustified and lacking grounds. On the other hand, the OSC’s spokesperson stated that the regulator would address Binance’s application and non-compliance with the summons later in the week.
Implications and Future Proceedings
The Capital Markets Tribunal made a significant ruling in the case, requiring Binance to publicly disclose the nature and content of the investigation order, as well as the information it was summoned to provide. This decision enhances transparency surrounding the investigation and its scope.
A subsequent hearing on the issue of jurisdiction is scheduled for June 2, where further discussions on the case will take place. Binance has pursued registration in multiple jurisdictions globally, including France, Japan, and Dubai, without designating an official headquarters. According to the Canadian filings, Binance is incorporated and operates via a registered office located in George Town, Cayman Islands.
Binance’s situation is not unique, as several major cryptocurrency exchanges have withdrawn from the Canadian market due to the country’s imposition of stricter regulations. However, other exchanges, such as Coinbase Global Inc., have chosen to remain in Canada and pursue registration under the new rules.
Conclusion
Binance’s disclosure of an investigation order from the Ontario Securities Commission highlights the increasing regulatory and legal scrutiny faced by the world’s largest cryptocurrency exchange. The OSC’s inquiry focuses on whether Binance attempted to bypass local regulations and compliance controls while seeking approvals in Canada. Binance’s subsequent withdrawal from the Canadian market and its ongoing legal challenges indicate the complexities faced by cryptocurrency exchanges in navigating evolving regulatory landscapes.
