Binance is asking its prime brokers to do enhanced Know Your Customer (KYC) work on clients to ensure that they aren’t serving U.S. nationals, according to a report from Bloomberg.
Prime Brokers act as intermediaries between institutional investors and the market, offering services such as custody, trade execution, risk management, and lending with the aim of attracting institutional investors by providing a comprehensive end-to-end service model similar to their counterparts in traditional finance.
According to Bloomberg, Binance has mandated that prime brokers like FalconX and Hidden Road gather more client data, such as office addresses and the locations of founders and employees, along with signed attestations confirming the accuracy of the information. This comes after Binance entered a guilty plea to violating sanctions and money-transmitting laws and settled the case for $4.3 billion.
The exchange claimed in a statement that was posted on Bloomberg that “Binance is fully committed to compliance and has made public how it assesses end users who can access the Binance platform.” “Binance provides clarity to businesses wishing to access its market-leading liquidity by making its standard transparent.”
Court records that were made public in November disclosed that U.S. consumers played a major role in Binance’s explosive expansion. This was a practice that U.S. officials considered unlawful because the exchange was not registered as a U.S. firm.
Court filings from the period showed that, despite being aware of the risks, Binance’s former CEO Changpeng “CZ” Zhao and other officials pushed high-value American clients to obscure their connections to the country by employing techniques like VPNs to mask their IP addresses and an API to access the primary exchange.