The Binance does not have authorization from the Securities and Exchange Commission (CVM) to offer derivative products in the country. This is why the entity has reopened an administrative sanctioning process against the world’s largest cryptocurrency exchange.
Below is the message that Brazilian users encounter when trying to access the exchange’s Futures page:
By clicking continue, Brazilian clients can operate normally on the futures platform, in Portuguese. See below:
One striking point is that while Brazil’s protection against unauthorized service offerings is a fence of about ten centimeters, in the United States it is a steel wall: because it does not have a license to operate as Binance.com in the country, the global trading platform is not even accessible to Americans.
The Portal do Bitcoin accessed Binance in the United States and checked the barrier. As shown in the screenshot below, there Binance.com is only an informative page that redirects the user to Binance.US.
Contacted to comment on the situation, Binance reiterated that “it does not offer derivatives in Brazil and operates in compliance with the Brazilian regulatory landscape and maintains ongoing dialogue with authorities for the development of the crypto and blockchain sector in Brazil and worldwide.”
About the case described here, CVM sent the following note: “The issue subject of your request is under analysis in the context of Administrative Sanctioning Process 19957.008369/2022-11. CVM does not comment on specific cases.”
CPI reignited the controversy
All this debate resurfaced during the Financial Pyramids CPI hearing with Guilherme Haddad Nazar, Binance’s general director in Brazil and nephew of the Minister of Finance, Fernando Haddad.
The executive was questioned about the offering of derivatives by the deputies who noticed that even after the CVM’s stop order three years ago, the service remained accessible to Brazilians who changed the platform’s language.
“It is known that in 2020, CVM issued a declaratory act, a stop order, alleging that Binance was committing irregularities. At the time, we adjusted, and we saw that the measures taken were appropriate. […] The process was reopened, but our understanding is that we are fully compliant,” said Nazar.
Disputes between CVM and Binance
Binance was the target of an initial administrative process by CVM in 2020 when it launched a platform in Brazil called Binance Futures. Through this service, clients were able to invest in derivatives linked to cryptocurrencies.
When Binance started offering derivatives, it began dealing with securities without authorization from the regulatory authority – article 2, section VIII, of Law no. 6,385/76 establishes that derivative contracts are considered securities regardless of the assets.
The company took the platform offline for users using the site in Brazilian Portuguese but left it unchanged when choosing any other language. This includes Portuguese from Portugal, which practically kept the service equally accessible.
Initially, the barrier of “Brazilian Portuguese” was enough for CVM, which in May 2022 stated that it no longer had a case against the exchange in a clarification request made by the Senate.
In that same month, Portal do Bitcoin accessed the platform for Brazilians and asked Binance’s customer support how to operate with derivatives. The customer support explained step by step how to circumvent CVM’s rules.
This episode caused CVM to reopen the case against Binance. The exchange proposed a settlement of R$ 2 million to close the case, but the commission refused.
The process is still ongoing, and the relatorship has been transferred to the president of CVM, João Pedro Nascimento.
Meanwhile, Binance is also facing pressure from the Financial Pyramids CPI. This week, the exchange refused to deliver the list of the platform’s 700 largest clients, a request made by the Commission through an official document.
In its response, Binance stated that the CPI’s request was not clear enough. The exchange also did not deliver the contract with Latam Gateway, its payment processor in Brazil, claiming lack of time.
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