How to Dodge Binance and Invest in Cryptocurrencies
Despite the recent downfall of Binance, a company that has become synonymous with the crypto-currency world, its CEO, Cheng Zhao, is taking steps to ensure that the company remains above the regulatory fray. Zhao has been decrying what he calls "frivolous external attacks" on the company and has vowed to remain steadfast in his efforts to keep regulators at arm's length.
Cryptocurrency prices are subject to high market risk and price volatility
Investing in cryptocurrencies can be an attractive way to make money, but there are also risks involved. The volatility of virtual currencies is a key factor to consider. In order to get a better handle on the volatility of cryptocurrencies, investors need to understand how it works.
One of the best ways to understand the volatility of cryptocurrencies is by examining their prices over time. The price of a virtual currency is calculated by multiplying the price of the underlying by the number of coins in circulation. The amount of coins in circulation is used as an indicator of demand for the coin.
Another way to understand the volatility of cryptocurrencies is by examining their implied volatility. This measure is often called 'Black' volatility. Essentially, implied volatility is the amount of money that an investor is willing to lose in order to be able to buy or sell a specific asset. This measure is sometimes used to calculate the volatility of stocks.
The price of virtual currencies has been extremely volatile in recent months. This is in part due to a lack of liquidity in the crypto exchanges. The price of multiple virtual currencies crashed last month, wiping out hundreds of billions in investments.
When the price of a virtual currency crashes, it's easy for investors to lose money. But seasoned investors tend to view massive retracements as buying opportunities.
Investors should be careful not to get swept up in the hype and emotions. The volatility of virtual currencies is a real risk, and seasoned investors should be able to make sound decisions when the time comes.
In recent years, a number of investors have made the argument that Bitcoin is a substitute for traditional value stores. However, many investors still believe that it will retain its value in the future.
Zhao's strategy for keeping regulators at arm's length
Founder and CEO of Binance, Changpeng Zhao, has been at the forefront of the crypto industry in recent years. With more than 120 million users, Binance is one of the largest crypto exchanges in the world. However, as with many crypto companies, Binance has recently undergone a shake-up in its compliance program.
A recent Reuters report claimed that criminals used Binance to launder illicit funds. Zhao responded to the report by saying he was "intimidated" by a Reuters report, but did not deny that he had seen the report. Zhao also scolded an employee for failing to grow Binance in new markets. He also took staff on a ski trip to Japan and a beach vacation to Thailand.
The most important thing to note here is that Zhao has been known to pay his staff in Binance's own virtual token, BNB. This is part of the company's larger strategy to increase its ability to detect illegal crypto activity.
The other important thing to note is that Binance has been the subject of a money-laundering investigation by the U.S. Justice Department. The agency has requested extensive internal records from the crypto company. In addition, Binance is currently under investigation by the New York attorney general's office for accepting local residents. Similarly, Binance has been targeted by regulators in Japan, China and Australia, as well as by regulators in the United Kingdom and France.
The Reuters report claims that Zhao is also "intimidated" by a recent Reuters report, which claimed that Binance had failed to register with the Treasury Department. This has led the U.S. Justice Department to investigate Binance and is a good reason to keep a close eye on the company.
Tai-Chi entity would "insulate" Binance from legacy and future liabilities
During the first five months of Binance's launch, it had about 1 million U.S.-based users, according to Reuters. But last year, the Financial Conduct Authority (FCA) put the company under curbs, citing concerns over its lack of registration with the Treasury Department and its ties to Iranian crypto exchanges. It has also been accused of violating sanctions on Iran, which aim to keep foreign firms from helping the country's government evade a trade embargo.
The FCA concluded that Binance's UK firm was incapable of effectively supervising the company's business, and refused to provide information on the company's legal status. It also found that Binance had gaps in its anti-money laundering (AML) controls, which allowed hackers and fraudsters to launder money through the platform.
The Justice Department's pursuit of Binance was followed by a report in June that said criminals used the platform to launder illicit funds. In response, Binance executives asked an entrepreneur named Harry Zhou for advice. After a video conference, Zhou presented a proposal to Binance's executive group. The proposal called for a separate U.S. entity that would offer a slimmer selection of tokens than its main exchange. It would also serve as a regulatory inquiry clearing house. Zhou did not respond to requests for comment.
In a bid to keep his company's operations secret, Binance CEO Changpeng Zhao tasked his executives with ensuring that the exchange continued to have access to the U.S. market. He also asked his employees not to disclose their work addresses. However, his personal assistant arranged a video call with Zhou and told him: "People love you!"
Binance's main exchange is protected from regulators by its use of virtual private networks (VPNs). Employees were also told to avoid wearing the company's branding, and that they could only communicate with each other through encrypted messaging services. But the company has also increased its secrecy rules in recent months, restricting employees from discussing the company's activities in public.
Employee warns that statement would leave a "paper trail"
Earlier this year a Reuters report revealed that Binance had been used by criminals to launder illicit funds. Binance's virtual token, BNB, had soared 15-fold early last year as the crypto market boomed. But the exchange had not registered with the Treasury Department, which required financial companies with substantial business in the U.S. to do so. And the exchange had not complied with the Bank Secrecy Act, which requires financial companies to register with the government and maintain strong anti-money laundering controls.
Reuters reviewed thousands of company messages and found that Binance had made some of the more enticing suggestions in its message. For example, the exchange had created a guide that explained its mission, and a guide to using its Keybase - a secure messaging service. In addition, the exchange emphasized the speed at which it was able to deliver results.
In addition, the exchange had also been working with law enforcement and government agencies throughout the world. But Reuters found that it had been "withholding information from the regulatory authorities that could help protect the company and its customers." And there was a gap in the exchange's anti-money laundering controls, which allowed hackers to launder illicit funds.
While Binance may have been the first to implement a virtual currency as a payment method, it did not register with the Treasury Department. The company subsequently took a page from the book and opted to hide its headquarters in the Cayman Islands. It also spelled out some of its anti-money laundering requirements, and even went so far as to warn employees that disclosing its address would leave a "paper trail".
Binance also opted not to provide details of its legal structure, such as where it registered in the United States, or how it managed to keep its address secret. In the end, Binance's UK firm refused to give its address or details of its business, and the company had to register as a money-service business with the Treasury in June.
