German Regulator Expresses Concerns About Binance CEO Before License Application Withdrawal: Report

The German Federal Financial Supervisory Authority, commonly known as BaFin, allegedly advised Binance, a major cryptocurrency exchange, to withdraw its licensing application due to concerns related to the exchange’s CEO, Changpeng Zhao, also known as “CZ,” and the company’s overall structure.

As reported on July 28 by The Wall Street Journal, BaFin raised doubts about CZ passing the “fit and proper” test, a regulatory requirement set by the financial watchdog. The test aims to assess the suitability of managing directors, which, in this case, refers to CZ. The guidelines state that managing directors must possess the necessary professional qualifications, be of good repute to oversee an institution, and allocate sufficient time to perform their functions effectively.

Additionally, BaFin reportedly expressed concerns about the company’s structure hindering effective regulatory supervision. Subsequently, Binance announced on July 26 that it had withdrawn its licensing application in Germany, citing a focus on ensuring compliance with the European Union’s Markets in Crypto-Assets (MiCA) framework as a reason for the decision.

However, a Binance spokesperson told that The Wall Street Journal’s report was inaccurate. The exchange did not offer specific details regarding CZ’s situation at the time of publication.

In the United States, Binance is currently facing legal actions from both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for alleged violations of securities laws and trading guidelines, respectively. In response, Binance’s lawyers have requested the dismissal of the CFTC lawsuit in a court filing on July 27, arguing that the commission exceeded its authority.

Despite being one of the largest crypto exchanges globally, Binance operates without a physical headquarters. Reports indicate that CZ has had a residence in Dubai since 2021. However, serving a legal summons to CZ posed challenges for the SEC in June.

While no criminal charges have been officially filed at the time of publication, there are reports suggesting that the U.S. Department of Justice (DoJ) is conducting an investigation into Binance for potential violations of U.S. sanctions related to Russian entities. Binance’s chief strategy officer, Patrick Hillmann, announced his departure from the firm on July 6, reportedly in response to the DoJ’s investigation.

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