Amidst the persistent challenges faced by the cryptocurrency industry, the U.S. Commodity Futures Trading Commission, or CFTC, has declared its intent to maintain a robust stance against cryptocurrency exchanges found to be in violation of trading laws. The commission explicitly stated that it will not tolerate the use of virtual private networks [VPNs] or any other measures designed to bypass Know Your Customer [KYC] regulations. Furthermore, the CFTC emphasized its determination to pursue non-U.S. entities involved in the crypto space.
According to a report by Business Insider, this heightened scrutiny is exemplified by the recent case involving Changpeng Zhao, the former CEO of Binance, a major player in the cryptocurrency exchange landscape. Zhao, along with his platform, faced charges related to breaches of U.S. anti-money-laundering laws. In response to the allegations, Zhao pleaded guilty and subsequently stepped down from his role as CEO. The repercussions for Binance include substantial fines, with the company set to pay over $4.3 billion, $50 million of which will be contributed by Zhao himself. A significant portion of these penalties is earmarked for settling claims raised by the CFTC, particularly concerning the facilitation of unregistered crypto derivatives trading for U.S. customers.
CFTC Commissioner Christy Goldsmith Romero emphasized the privileged nature of access to U.S. markets, stating unequivocally that such access is not a right. She underscored the commission’s commitment to aggressively pursuing crypto exchanges found to be in violation of trade laws. Notably, the commissioner explicitly mentioned the rejection of practices aimed at evading KYC rules, including the use of VPNs and superficial pop-up questions merely asking users to confirm their non-U.S. residency.
Non-US Entities Under CFTC Scanner
Caroline D. Pham, another CFTC Commissioner, issued a separate statement to emphasize the international reach of the commission’s authority. She stressed that the CFTC’s pursuit of non-U.S. entities in the crypto space will persist without interruption.
This regulatory crackdown comes at a time when the crypto industry is witnessing a protracted legal battle involving Sam Bankman-Fried, the founder of FTX. Facing seven felony counts, including conspiracy to commit money laundering, Bankman-Fried has pleaded not guilty and currently awaits sentencing at the Metropolitan Detention Center in New York. The severity of the charges could potentially result in a lengthy prison term of up to 110 years.