In late November, financial regulators in the Philippines put Binance on notice that it was operating in the nation without a licence.
They said Binance wasn’t authorised to sell or offer securities in the country, and warned citizens against using the platform. If the world’s biggest crypto exchange didn’t address the problem by the end of February, officials said they would block its operation.
Now time is running out.
A spokesman from the nation’s Securities and Exchange Commission told DL News this week the agency is evaluating the ramifications of banning Binance, including what that might mean for the funds of Filipino accountholders.
Officials are “working with other government agencies on the procedure of restraining unregistered entities’ operations in the Philippines,” the spokesperson said.
No response
Binance has not publicly addressed the issue. And the crypto community in the Philippines, which is expected to comprise 14 million users by 2028, remains uncertain whether the SEC will follow through with its vow or grant Binance an extension.
“I’ve tried to reach out [to the SEC] but didn’t really get a response,” said Luis Buenaventura, an assistant vice president at GCash and the co-founder of crypto exchange platform BloomX in the Philippines.
“The community is in the dark about whether it’ll actually happen at the end of the month or not.”
Binance did not respond to requests for comment by DL News.
The potential action punctuates a turbulent period for Binance as it labours to move past the historic guilty plea it made in November in the US.
The company admitted it violated banking laws and agreed to pay $4.3 billion in penalties. It appointed a new CEO, Richard Teng, to replace co-founder Changpeng Zhao, who also pleaded guilty to violating US banking law.
Teng promised to do better on complying with regulations worldwide.
The very next week, the Philippines emerged as a test case for Teng and Binance 2.0. Yet so far, Binance doesn’t appear to have addressed the issues cited by regulators.
A legion of salesmen
The Asian nation’s SEC faulted Binance for using a legion of “salesmen, brokers, dealers or agents, representatives, promoters, recruiters, influencers, endorsers, and enablers” to promote the exchange.
Officials warned the promoters they could face up to 21 years in prison and a fine of 5 million pesos, or $90,000, if they continued promoting Binance.
The agency also asked Google and Meta to stop displaying Binance advertisements to Filipino users.
In December, Kelvin Lee , the head of the SEC, said in a panel discussion that a ban on Binance would come into effect three months after the advisory was issued on November 29. But the agency didn’t rule out extending it.
‘There was a really big appetite for well-priced crypto trades.’
Luis Buenaventura, crypto entrepreneur
If the ban comes, the crypto community in the Philippines is anticipating it to hit around February 29. Some, like lawyer Rafael Padilla, have claimed that authorities can’t ban Binance without a court order.
Buenaventura said there had been no new communications to the industry from the SEC or the National Telecommunications Commission, which would be tasked with implementing the ban.
Game changer
When Binance burst onto the scene in the Philippines in 2019, it was a game changer, according to Buenaventura. BloomX was the first vendor on Binance P2P in the Philippines to record $1 million in trades.
Binance’s P2P platform was able to offer much lower transaction fees than local exchanges, which typically charged around 2%, according to Buenaventura.
“There was a really big appetite for well-priced crypto trades,” Buenaventura said.
On Binance P2P, a unit that lets users trade with one another, that spread compressed down to 0.5%, with a 0.1% portion going to Binance, he said.
It was attractive and quickly became the country’s most popular trading platform.
BloomX ended up leaving Binance P2P to avoid that 0.1% charge and deal more directly with customers. But Buenaventura also noted some other issues with the platform: the majority of vendors had no licence or business permit.
“It was the hub for every single unlicensed vendor in the country,” said Buenaventura.
Local exchanges struggled
Additionally, Binance’s relatively low commission made it harder for local exchanges to compete, especially when they were also paying for permits and compliance obligations that Binance didn’t have.
It’s not just Binance though.
Buenaventura points out that other international, unlicensed exchanges have not been singled out by the SEC.
“It’s not like these other guys don’t exist. They’ve not been very specific about those other players,” he said.
Reasonable level
Without Binance in the picture, transaction fees may rise once again. Yet Buenaventura is hopeful that market pressure will bring prices down.
“It’s probably not going to end up at half a percent because we do have things like compliance but we’re hoping it will bring the prices down to a more reasonable level,” he said.
“It’s beneficial to the local players because we actually went through the trouble of getting those licences. We actually went to the trouble of complying with regulations.”
Callan Quinn is DL News’ Asia Correspondent. Get in touch at callan@dlnews.com.
