Decoded: Technology Law Insights, Volume 2, Issue 6

Binance Probed by CFTC Over Whether U.S. Residents Traded -

"Binance, which has an office in Singapore but says it lacks a single corporate headquarters, hasn’t been accused of misconduct and the investigation may not lead to an enforcement action."

Why this is important: Interest in cryptocurrency is exploding, and investors are seeking out exchanges on which they can buy, sell, and trade this new asset class. But, these exchanges have to be mindful of laws affecting their operations. The United States Commodity Futures Trading Commission ("CFTC"), for example, has taken the position that cryptocurrencies are commodities and exchanges and must register with the agency. That means that these exchanges either must register and become subject to U.S. oversight or take steps to block U.S. residents from their platform. Taking the latter option, however, is not always easy. In addition to technological limitations, there are deliberate attempts by U.S. residents to avoid geographic limitations, whether to avoid regulatory scrutiny or simply trade cryptocurrencies that are not available on U.S.-based exchanges. And, the consequences of imperfect screening measures are demonstrated by the CFTC’s reported investigation of Binance. Expect, then, cryptocurrency exchanges operating outside the U.S. to follow this matter closely and explore new and better ways to restrict U.S residents.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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