Finding that Binance is operating in the Philippines without a licence, regulators plan to block access to its website in the next three months, an employee with a regulatory agency confirmed in a call with DL News Wednesday.
The Asian nation’s Securities and Exchange Commission, or SEC, also asked tech giants Google and Meta to halt the display of Binance advertisements to Filipino users.
The move comes days after the SEC issued an advisory notice against Binance and warned investors that the world’s biggest crypto exchange was not authorised to sell or offer securities to the public in the Philippines.
Influencers and endorsers
The agency also painted a picture of freewheeling operation that uses a legion of “salesmen, brokers, dealers or agents, representatives, promoters, recruiters, influencers, endorsers, and enablers” to persuade investors to deposit their money on the platform.
Regulators warned Binance’s promoters that they could face up to 21 years in prison and a fine of 5 million pesos($90,000).
“Based on the reports and information gathered by the Commission, Binance has been actively employing promotional campaigns on various social media platforms to attract and entice Filipinos to engage in investment and trading activities using its platforms,” the SEC said in the notice.
Binance did not immediately respond to a DL News request for comment.
The action is the latest headache for Binance’s new CEO, Richard Teng. Taking the helm after co-founder Changpeng “CZ” Zhao resigned and pleaded guilty to violating US banking law last week, Teng must get the exchange compliant with regulators around the world.
In a settlement with US authorities, Binance pleaded guilty to charges it facilitated transactions for terrorist networks such as Hamas and failed to comply with anti-money laundering and sanctions laws. The firm agreed to pay $4.3 billion in penalties and enforce new controls.
The situation in the Philippines shows how much work Teng has to do.
Basic regulatory requirements
Filipino officials have been pressing Binance to legalise its operations for months.
In July 2022, Infrawatch PH, a local watchdog and think tank, highlighted Binance’s lack of compliance with basic regulatory requirements.
In a 12-page letter, the organisation accused Binance of operating without SEC registration and necessary licences for offering financial instruments to the public.
At the time, Leon Foong, Binance’s regional head in Asia, refuted these allegations in an interview with BitPinas, a local crypto news outlet. He said they were “baseless” and that Binance was trying to secure the required licences.
But those efforts never materialised into concrete action.
Despite Infrawatch’s efforts, the Department of Trade and Industry said it was unable to impose a ban on Binance, citing the absence of explicit guidelines from the nation’s central bank regarding the regulation of cryptocurrency platforms.
A lot of hurdles
However, the SEC, responding to Infrawatch PH’s concerns, advised the public against investing with Binance and encouraged affected investors to lodge complaints.
The agency emphasised it was committed to safeguarding local investors and planned to introduce a revised regulatory framework for “virtual assets service providers,” or VASPs, by the end of 2023.
“We have issued multiple advisories to the public reminding everyone not to invest in entities that are not registered here in the Philippines,” SEC Commissioner Kelvin Lester Lee said in a local media interview. “But I understand they have a lot of hurdles in front of them.”
In September 2022, local media reported Binance was attempting to acquire a locally licensed exchange to gain a legal foothold in the country. It’s a strategy the company has employed in other markets with regulatory challenges, including Japan, where it acquired a local platform called Sakura Exchange BitCoin.
A report from the South China Morning Post last month suggested Binance is employing a similar tactic in Hong Kong, where it has been linked to local exchange HKVAEX.
Community members
By targeting the many promoters of Binance, the SEC’s new statement marks a shift in tone.
It’s unclear how big Binance’s business is in the Philippines, or how many users it has. The company doesn’t publish regional user numbers.
But there is a dedicated following of “community members” that belong to programs such as Binance Angels and Student Ambassadors. It held a Halloween event for some of its biggest supporters in the country.
Our #BinanceTreats Halloween celebrations have started in the Philippines 🇵🇭
Joined by over 150 community members, we celebrated Halloween with games, sharing sessions, and a costume competition! pic.twitter.com/0BN5jtEiAz
— Binance (@binance) October 23, 2023
At another locally organised event in Manila, attendees enjoyed cookies with the Binance’s logo iced onto them. Binance has also partnered with local universities in the Philippines, offering free courses on Bitcoin and digital assets.
Scrutiny of these types of business practices may pick up momentum in other markets following the historic settlement with US authorities last week.
Binance, which does about $10 billion in daily trading volume, must appoint an independent monitor to review the company’s efforts to prevent terrorist organisations and criminals from using the exchange to launder dirty money.
And Zhao, who travelled from Dubai to enter his guilty plea in the US, was released on a $175 million bond as he awaits sentencing in February.
Got a story about crypto in Asia? Get in touch with DL News’ Asia Correspondent at callan@dlnews.com
