Binance Instantly Implements Mandatory KYC Verification on Road to Compliance

Binance’s journey of compliance kicks off with strict KYC rules to both its new users and existing users

By
Chung Yee
on
August 21, 2021
Category:
BSC News

Intermediate Verification is Now Mandatory

The announcement caught many of its users off guard as Binance started taking immediate steps towards compliance by first controlling its user onboarding process. 

Binance announced on Friday, August 20th, that new users must complete intermediate verification to access its products and offerings. Any existing users without intermediate verification will be limited to only withdrawal, order cancellation, position close and redemption.

“If you have any issues completing KYC on @binance, start a chat with our CS team, and drop a case id below. Always working on improving our products. 🙏” tweeted Changpeng Zhao, the CEO of Binance.

Presently, Binance has three levels of Know-Your-Customer (KYC) verification: basic, intermediate, and advanced. With this announcement, every user will have to meet the minimum requirements of an intermediate verification, which involves providing a government-issued ID and passing the facial verification process. 

The recent regulatory clout has affected Binance’s operation. In Malaysia, Binance’s website is no longer accessible to Malaysians. This came after the Malaysian Securities Commission (SC) orders Binance to halt all services on July 30. Binance has been facing similar responses from regulators around the world. 

Source: In order to incentivize its users to verify their account, a savings trial fund voucher of 500 BUSD was offered

Meeting a Compliance Standard

The compliance exercise is a tedious process, but it is inevitable for financial services providers. 

‘...these measures to help support its efforts in Know Your Customer (KYC) and Anti-Money Laundering (AML). This will further enhance user protection and combat financial crime’ said Binance in its announcement.

KYC is a mandatory procedure for financial service providers. It enables the service provider to identify and verify their customers by conducting customer due diligence. 

Apart from combating illicit activities, KYC is also a tool to identify the jurisdiction of the user. There can be restrictions imposed by regulators within a particular jurisdiction. Not all range of products and services can be made accessible to the platform users. 


The Compliance Chapter

In a posting by CZ in conjunction with Binance’s 4th Anniversary, the founder acknowledged that Binance would have to embrace regulation as it continues to grow. This is inevitable as Binance pivots from a technology innovator into a financial services provider. 

In July, CZ tweeted that Binance is enhancing its KYC. Binance has significantly reduced the withdrawal limits from 2 BTC to 0.06 BTC for accounts with basic verification. 

Source

Binance, through its CEO, has announced that the company is in the process of applying for licenses and approval where there is an existing legal framework for crypto exchanges. This pivot is part of Binance’s strategy to comply by localizing its operation. 

The same approach was adopted when Binance created Binance.US for the United States and Binance Markets Limited for the United Kingdom. Binance has also stepped up on staffing the right personnel to oversee compliance. Binance recently hired US Treasury Criminal Investigator, Greg Monahan, as its new Global Money Laundering Reporting Officer (GMLRO). 

In early July, Binance integrated CipherTrace Traveller to meet the ‘travel rule’ regulation. The travel rule is a compliance framework that applies to information that is exchanged between two financial institutions. 


What to Expect?

Binance’s compliance journey has just begun. There will be more announcements in the future. Licenses and approvals from specific jurisdictions will likely be announced in the near future with its accompanying set of restrictions. There will be some obstacles along the way as crypto regulations are still evolving. Binance may take a more conservative approach by implementing self-policing internal procedures and avoiding listing of risky services such as high leveraged trading


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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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