Binance: Working Off The Books

[Alison C]

This thread is for the general discussion of the Article Binance: Working Off The Books. Please add to the discussion here.

 

[Lastseasonwonder]

Thanks for writing this article, @Alison C - really enjoyed reading it. Also, thanks @Jaysen for setting up the weekly newsletter. Wish I discovered and read it last year; maybe then I would have actually secured a TC 😂 .

I would like to open a discussion with my opinion on the news story:

It seems to me that Binance, the world's largest crypto exchange, is actually doing nothing wrong - by law - and the FCA can't really do much in terms of intervening on trades through Binance. If you break the law into its bare bones, starting from the fact that the FCA is afforded power by primary legislation - Financial Services and Markets Act - then and only then you start to understand that by law the FCA exceeds its remit if it intervenes in transactions through Binance (great explanation in this FT article in the comment section by 'At length but sometimes right': https://www.ft.com/content/17620a3b-b82d-4b85-aa85-4cf2793b7a02#comments-anchor). Therefore, I believe the FCA, among other regulators, are just issuing notices and warnings to increase awareness of the (potential) risks of crypto.

Furthermore, a news story like this continues to display the following theme: the struggle of independent bodies and government institutions in regulating/keeping tab of large corporations and their complex corporate and tax structures. Think of it like Google or Facebook and the CMA. LOL. The question, then, begs: has the balance of power shifted to large international corporations over the state?

Lastly, I think the main issue with crypto, in terms of regulation at least, is not necessarily who the money is being payed to or received by. This is because, due to cryptography, such as Blockchain, it is extremely difficult to commit fraud. You would have to pay yourself by making a transaction using two accounts you know (i.e. printing fake money), but would have to do that using all the accounts on the ledger (basically the database of all crypto transactions, and every crypto user can access this database) to make it look legit. This means hacking into all those computers and making the same transaction such that all ledgers store that transaction. That is very time-consuming, let alone how practically impossible it is seems to accomplish such a cyber attack. Instead, the critical regulation issue seems to be: why the transaction is taking place. In essence, why is crypto being transacted. As data shows, such as that in the TCLA article, illegal activity such as the sale of drugs has been transacted through crypto.

If you have reached here - thanks for reading, and what is your opinion on the matter?

 

[Alison C]

Thanks for writing this article, @Alison C - really enjoyed reading it. Also, thanks @Jaysen for setting up the weekly newsletter. Wish I discovered and read it last year; maybe then I would have actually secured a TC 😂 .

I would like to open a discussion with my opinion on the news story:

It seems to me that Binance, the world's largest crypto exchange, is actually doing nothing wrong - by law - and the FCA can't really do much in terms of intervening on trades through Binance. If you break the law into its bare bones, starting from the fact that the FCA is afforded power by primary legislation - Financial Services and Markets Act - then and only then you start to understand that by law the FCA exceeds its remit if it intervenes in transactions through Binance (great explanation in this FT article in the comment section by 'At length but sometimes right': https://www.ft.com/content/17620a3b-b82d-4b85-aa85-4cf2793b7a02#comments-anchor). Therefore, I believe the FCA, among other regulators, are just issuing notices and warnings to increase awareness of the (potential) risks of crypto.

Furthermore, a news story like this continues to display the following theme: the struggle of independent bodies and government institutions in regulating/keeping tab of large corporations and their complex corporate and tax structures. Think of it like Google or Facebook and the CMA. LOL. The question, then, begs: has the balance of power shifted to large international corporations over the state?

Lastly, I think the main issue with crypto, in terms of regulation at least, is not necessarily who the money is being payed to or received by. This is because, due to cryptography, such as Blockchain, it is extremely difficult to commit fraud. You would have to pay yourself by making a transaction using two accounts you know (i.e. printing fake money), but would have to do that using all the accounts on the ledger (basically the database of all crypto transactions, and every crypto user can access this database) to make it look legit. This means hacking into all those computers and making the same transaction such that all ledgers store that transaction. That is very time-consuming, let alone how practically impossible it is seems to accomplish such a cyber attack. Instead, the critical regulation issue seems to be: why the transaction is taking place. In essence, why is crypto being transacted. As data shows, such as that in the TCLA article, illegal activity such as the sale of drugs has been transacted through crypto.

If you have reached here - thanks for reading, and what is your opinion on the matter?

So glad you enjoyed it, and it's great that you want to start a discussion.

Another thing to remember about cryptocurrencies, as well as how the regulators simply aren't set up to keep them in line yet as you outline, is their decentralised nature. In spite of holding value, they are not part of centralised democratic financial systems in the way that we have previously been used to. People control the assets but no one is running the Bitcoin Policy Unit, because there isn't one. It will be fascinating to look back at the evolution of these systems, for sure.

You rightly point out that the FCA, which, after all, is part of our democratic toolbox, is not exactly drowning but most certainly waving, at a largely Blockchain-illiterate public that it has a duty to protect. It seems ironic that El Salvador, hardly known for its robust jurisdiction or government, is from today the first country to officially adopt Bitcoin as legal tender. (Apparently, the government's e-wallet crashed almost immediately but they got it sorted by lunchtime.)

Binance is making noises to show that it wants to fall into line, but time will tell. While the cat's away, the mice will play but what happens when there was never a cat in the first place?

 

[Lastseasonwonder]

So glad you enjoyed it, and it's great that you want to start a discussion.

Another thing to remember about cryptocurrencies, as well as how the regulators simply aren't set up to keep them in line yet as you outline, is their decentralised nature. In spite of holding value, they are not part of centralised democratic financial systems in the way that we have previously been used to. People control the assets but no one is running the Bitcoin Policy Unit, because there isn't one. It will be fascinating to look back at the evolution of these systems, for sure.

You rightly point out that the FCA, which, after all, is part of our democratic toolbox, is not exactly drowning but most certainly waving, at a largely Blockchain-illiterate public that it has a duty to protect. It seems ironic that El Salvador, hardly known for its robust jurisdiction or government, is from today the first country to officially adopt Bitcoin as legal tender. (Apparently, the government's e-wallet crashed almost immediately but they got it sorted by lunchtime.)

Binance is making noises to show that it wants to fall into line, but time will tell. While the cat's away, the mice will play but what happens when there was never a cat in the first place?

Thanks for diving in to the discussion, @Alison C.

I 100% agree with your point regarding Bitcoin's decentralised nature. I think it is its key attraction to many users.

Yes! Without a decent understanding of Blockchain, it becomes difficult to analyse news concerning Bitcoin, or at least that is just my opinion. When I was oblivious to the basics of crypto, such as cryptography, I couldn't understand what all the fuss was about. I guess that is why it is sometimes beneficial to creep into the other side, and by other side I mean non-legal knowledge. For anyone reading this and wanting to learn about the basics of crypto, this video -

- is very helpful, and it goes further to give an outline of currency dating back to centuries ago to put things into perspective. It certainly helped me, though please bare in mind that it is only basic knowledge!

Thanks for sharing the news about El Salvador. That is very interesting - I will certainly follow that story in the upcoming
week.

Finally, your use of the saying - 'while the cat's away, the mice will play' - is pure genius! Genuinely, who is the cat (assuming there was ever one)? People have long debated who founded Bitcoin (many theories out there) and it can lead to fascinating arguments. That also links to your point about how, in years to come, we will look at the evolution of crypto as a form of currency in light of its decentralised nature.