Binance: Treasury ministers met with cryptocurrency exchange under US money-laundering investigation

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Ministers met with a number of firms before announcing that the UK would seek to become a ‘global crypto hub’

Treasury ministers held meetings with a cryptocurrency firm which is currently under criminal investigation in the US relating to compliance with money-laundering laws, NationalWorld can reveal.

Binance, the world’s largest cryptocurrency exchange, is under investigation by the Department of Justice, with prosecutors thought to be considering filing criminal charges or working on a settlement with the firm.

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The government met with Binance and a number of other crypto-asset firms in the first few months of 2022, before announcing in April that the UK would become a “global hub for crypto-asset technology”. Reports suggest Binance was under investigation by US authorities at the time, with the probe launching in 2018.

The Financial Conduct Authority has previously issued a consumer warning about Binance and stated in 2022 its view that the firm “is not capable of being effectively supervised,” which it described as “particularly concerning”.

In response, the Treasury told NationalWorld: “The government has already taken steps to bring certain crypto-asset activities into the scope of UK regulation – and is considering further proposals for a broader regulatory regime.”

Crypto the ‘new front line’ in criminal scams

Ministers met with Binance on at least two occasions last year, to discuss the crypto-assets sector and business taxation, the latter as part of a roundtable alongside a Conservative-linked lobbying firm.

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Then-Economic Secretary to the Treasury John Glen met with Binance on 9 February 2022 to discuss crypto-assets, transparency releases show. This meeting was one of 10 which took place between January and April between Glen and a variety of firms with an interest in crypto-assets.

In April, Glen spoke at a finance summit in place of then-Chancellor Rishi Sunak, in which he said there has never been an invention “as hyped and misunderstood” as crypto technology. Glen used the speech to announce the government’s desire for the UK to become “the very best place in the world to start and scale crypto-companies”.

In a major boost to the sector, he also announced plans to allow certain types of cryptocurrency, known as stablecoins, to be recognised as valid forms of payment in the UK. In a press release announcing the move, Sunak said it was his “ambition to make the UK a global hub for crypto-asset technology”.

On the same day, the governor of the Bank of England, Andrew Bailey, told the ‘Stop Scams’ conference that cryptocurrencies are the new “front line” in criminal scams, and criticised some in the sector for arguing that crypto-assets shouldn’t be covered by sanctions on Russia.

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In May, Binance was one of several firms which met with Financial Secretary Lucy Frazer at a meeting organised by the Centre for Policy Studies think tank. Transparency releases record the purpose of the meeting being to discuss “business taxation”. Also present at the meeting were firms including Uber and BP, and lobbying firm Hawthorn Advisers, which was founded by former Conservative treasurer Ben Elliot. Also present was UK Finance, the trade association for the UK banking and financial services sector.

The consultant lobbyists register shows that Binance was a client of Hawthorn between April and June last year. Binance is also a public affairs client of another Conservative-linked lobbying firm, Hanbury Strategy, founded by Ameet Gill, a former adviser to David Cameron, and Paul Stephenson, an ex-senior adviser to the party.

Responding to a call for evidence from an ongoing Treasury select committee inquiry into crypto-assets, Binance called for the tax system “to be proportionate and support innovation”. It also wrote that “a well-designed, proportionate and efficiently administered regulatory regime” would help deliver “improved social and economic outcomes”.

Simon Youel, head of policy and advocacy at the Positive Money think tank, said:  “Despite often claiming to be a revolt against crony capitalism, the crypto industry is simply following in the footsteps of the big banks by lobbying politicians to rig policy in their favour.

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“Rishi Sunak announced his ambition to make the UK a crypto ‘hub’ after powerful industry interests like Binance had developed cosy relationships with the government.”

Why is Binance under investigation?

Last month, Reuters reported that prosecutors at the US Department of Justice were “split” on how to proceed in a long-running criminal investigation into Binance. According to the news agency, some federal prosecutors believe existing evidence is enough to file criminal charges against company executives, while others within the department have argued for more time to review evidence.

The investigation, which launched in 2018, is said to be examining the firm’s compliance with anti-money laundering laws. Binance has been criticised in the past for allowing users to trade on the platform without confirming their identity, allegedly leaving it open to money-laundering. Binance has claimed that in recent years it has heavily invested in compliance, with an executive at the firm describing it as “easily one of the most proactive parties to identify, freeze and get back funds”.

Last week, the Washington Post reported that a number of hedge funds based in the US have been asked to hand over records of their communications with Binance as part of the investigation.

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This comes after the high-profile collapse of FTX, another cryptocurrency exchange, late last year, which has prompted heightened scrutiny of the sector.

Binance ‘not capable of being effectively supervised’

In June 2021, the FCA published a consumer warning about Binance Markets Limited, part of the Binance Group, in which it stated that the firm was not permitted to undertake regulated activity in the UK without written consent from the FCA. It  also warned consumers to “be wary of adverts online and on social media promising high returns on investments in crypto-asset or crypt-asset-related products”.

Responding to reports at the time that a company in the Binance Group had advanced a loan to a crypto-asset business registered by the FCA under the Money Laundering Regulations, in March 2022 the FCA reiterated its concerns about Binance.

It said: “Due to requirements imposed by the FCA, Binance Markets Limited is not currently permitted to undertake any regulated activities without the written consent of the FCA. This requirement was put in place because, in the FCA’s view, Binance Markets is not capable of being effectively supervised. This is particularly concerning in the context of Binance Markets’ membership of the global Binance group, which offers complex and high-risk financial products posing a significant risk to consumers.”

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A Treasury spokesperson said: “The UK is committed to creating a regulatory environment in which firms can innovate, while crucially maintaining financial stability and regulatory standards so that people and businesses can use new technologies both reliably and safely. Recent events in the crypto market reinforce the case for timely, clear and effective regulation.

“The government has already taken steps to bring certain crypto-asset activities into the scope of UK regulation – and is considering further proposals for a broader regulatory regime.”

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