The German Federal Financial Supervisory Authority (BaFin) has reportedly expressed concerns over Binance‘s leadership and company structure, leading to the withdrawal of the cryptocurrency exchange’s license application in the country.
BaFin’s regulatory guidelines stipulate that managing directors must possess the required professional qualifications, maintain a good reputation, and dedicate sufficient time to their roles. However, the regulator reportedly advised Binance that its CEO, Changpeng Zhao, might not pass the “fit and proper” test.
According to reports from the local publication Finance Forward, Binance’s company structure was another point of contention for BaFin, which allegedly stated that the structure hindered regulatory supervision. The exchange, however, has not confirmed these reports. Instead, Binance has stated that it continues to work towards meeting BaFin’s requirements and remains committed to collaborating with regulators worldwide.
Binance’s regulatory challenges extend beyond Germany
The withdrawal of the license application in Germany is one of many regulatory challenges Binance faces. However, the exchange is also under scrutiny in the United States, with legal actions brought by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for alleged violations of securities laws and trading guidelines, respectively. Binance’s lawyers have requested the dismissal of the CFTC lawsuit, claiming the commission has exceeded its authority.
Furthermore, reports suggest that the U.S. Department of Justice (DoJ) is investigating Binance for potential violations of U.S. sanctions on Russian entities. These regulatory challenges have led to significant changes within Binance, including the departure of its Chief Strategy Officer, Patrick Hillmann.
Since 2020, German regulators have mandated that cryptocurrency exchanges and custodial services secure a license from BaFin to operate within the country and offer their products and services to local customers. Coinbase Germany emerged as the pioneer in this aspect, being the first to acquire a BaFin license to run a cryptocurrency custody service in June 2021.
As of February 2023, Binance boasted approximately 2 million German users, according to Wirtschaftswoche, making it one of the most prominent platforms in Germany. Despite lacking a German license, Binance’s platform remains accessible and usable by the public.
Should the license denial be confirmed, this could pose a setback for Binance, which recently disclosed that its European banking associate, Paysafe Payment Solutions, intends to cease support for the exchange.
Despite these hurdles, Binance remains one of the largest cryptocurrency exchanges globally. The company has stated that it is focusing its efforts on becoming compliant with the European Union’s Markets in Crypto-Assets (MiCA) framework.
