Breaking: Binance Sells Russian Operations to CommEX, Exits Market
Rebeca Moen Sep 27, 2023 08:39
Binance has announced the sale of its entire Russia business to CommEX, citing compliance issues as the primary reason for the exit. The transition process for existing Russian users is expected to take up to one year, with no financial strings attached to the deal for Binance.
Key Takeaways
- Binance to sell its entire Russia business to CommEX
- Off-boarding process for existing Russian users to take up to one year
- Binance cites compliance strategy as the reason for exit
Binance, the world's largest cryptocurrency exchange, has announced that it will sell its entire Russia-based operations to CommEX. Noah Perlman, Binance’s Chief Compliance Officer, stated, "As we look toward the future, we recognize that operating in Russia is not compatible with Binance's compliance strategy." The move comes as part of Binance's broader focus on compliance and regulatory adherence in over 100 other countries where it continues to operate.
While Russia is tightening regulations on crypto exchanges, the U.S. is simultaneously investigating Binance for potential violations of U.S. sanctions against Russia.
On May 6, 2023, the U.S. Department of Justice's national security division initiated an inquiry into Binance. The investigation focused on whether the exchange allowed Russian customers to access its platform in violation of U.S. sanctions, which were imposed in response to Russia's invasion of Ukraine. This inquiry was not an isolated incident; it followed a 2021 joint investigation by the Department of Justice and the Internal Revenue Service into the global exchange. Additionally, the U.S. Securities and Exchange Commission (SEC) has been probing Binance's relationship with two firms owned by its founder, Changpeng Zhao, since early 2022.
Earlier this year, on April 25, 2023, Binance quietly lifted restrictions it had placed on Russian citizens and residents over a year ago. These restrictions were initially imposed in March 2022 after the European Union sanctioned Russia for its invasion of Ukraine. At that time, Binance had stopped supporting deposits from Visa and Mastercard cards issued in Russia. However, by April 2023, users were able to deposit Russian rubles and other currencies from bank cards issued in Russia. The exchange also lifted limits for accounts with balances larger than 10,000 euros for users in Russia.
The European Union had broadened its sanctions last year, making it impossible for Russian citizens and residents to use any crypto service registered in the EU. This led to immediate actions from other crypto platforms like LocalBitcoins, Crypto.com, and Blockchain.com, which notified Russian users that their accounts would soon be discontinued.
To facilitate a seamless transition, Binance and CommEX have outlined an orderly process for the migration of users and their assets. Existing Russian users have been assured that their assets are secure and will be protected throughout the transition period, which is expected to last up to one year. A portion of new user registrations from Russia will be immediately redirected to CommEX, scaling up over time.
While the financial terms of the deal remain undisclosed, it is noteworthy that Binance will not have any ongoing revenue split from the sale. Additionally, the company does not retain any option to buy back shares in the business, marking a complete exit from the Russian market.
Although exiting Russia, Binance remains optimistic about the growth prospects of the Web3 industry globally. The company plans to "focus our energy on the 100+ other countries in which we operate," according to Perlman.
These regulatory pressures and policy shifts provide a broader context for understanding Binance's decision to exit the Russian market. The sale to CommEX can be seen as a strategic move by Binance to navigate a complex and evolving regulatory landscape, both in Russia and globally.
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