The Binance settlement exposes the opaque treatment of banks and cryptocurrency companies, according to Omid Malekan, an adjunct professor at Columbia Business School.
Events surrounding the cryptocurrency exchange Binance recently generated a lot of discussion regarding the US government’s crackdown on cryptocurrency companies. Omid Malekan, a writer and adjunct professor at Columbia Business School, claims that the American Department of Justice’s strategy, in this case, is very different from conventional financial practices.
Malekan posted on X (formerly Twitter): “People who sincerely believe that crypto is some unique enabler of bad people doing bad things don’t understand how the rest of the financial system actually works.” He added that companies following best practices in the fight against money laundering still manage sizable sums of illegal funds. “But since someone completed the paperwork, everything is regarded as acceptable.”
Malekan further contended that if conventional firms were treated in comparable cases like Binance, a lot of Wall Streeters would end up behind bars.
“Had they been held to the Binance Standard, hundreds of managing directors would have been imprisoned, and there would have been less money available for lobbying or shareholder buybacks. The bankers, however, were wise enough to never question the game.”
Malekan feels that even after the criticism, the exchange was still “wrong for not being compliant and wrong to lie to its customers.” A recent multibillion-dollar settlement between the U.S. government and Binance and its co-founder Changpeng “CZ” Zhao was reached over allegations that the exchange allowed people involved in illegal activity to transfer “stolen funds.” As part of the settlement, CZ stepped down as CEO.
Malekan also commended Binance for its recent efforts in promoting financial inclusion:
“It is responsible for the successful integration of tens of millions of underprivileged, brown, and impoverished people into the financial system—something that the compliant companies in the global financial industry have consistently failed to do.”
CIJ’s global money laundering investigation
Leaked documents acquired by the International Consortium of Investigative Journalists (ICIJ) reveal that some of the biggest banks in the world permitted criminals to launder trillions of dollars.
The investigation was made public in September 2020. It examined more than 2,100 reports of suspicious activity involving transactions totaling more than $2 trillion that financial institutions’ internal compliance officers reported as possibly involving money laundering or other criminal activity between 1999 and 2017. Major financial institutions like HSBC, Deutsche Bank, and the Bank of New York Mellon were among those that enabled these transactions.
Over 400 journalists from 110 news organizations across 88 countries were brought together by the ICIJ to look into banks that might be involved in money laundering.
Malekan’s article raises important questions about the DOJ’s approach to regulating cryptocurrency exchanges. The DOJ’s focus on paperwork compliance is understandable, but it is important to remember that the goal of regulation is to protect consumers and prevent illicit activity. If the DOJ’s approach is too focused on compliance, it may inadvertently harm consumers by stifling innovation in the cryptocurrency industry.
The DOJ should carefully consider Malekan’s arguments and take a more balanced approach to regulating cryptocurrency exchanges. The DOJ should focus on preventing illicit activity from taking place on exchanges, but it should also allow exchanges to operate in a way that is consistent with their mission to provide financial services to a global audience.