Binance under investigation by Australian regulatory agency ASIC for failure to comply with restrictions on wholesale clients.
According to a report by Bloomberg, the Australian Securities and Investments Commission (ASIC) is conducting a "targeted review" of the derivative business of Binance, the world's largest cryptocurrency exchange. The review includes the classification of Binance's retail and wholesale customers. Binance earlier stated on Twitter that a small number of Australian users were mistakenly classified as wholesale investors, but a spokesperson for ASIC mentioned that Binance has not yet reported this issue as required under its Australian Financial Services License.
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Earlier, Binance stated on Twitter that a small number of Australian users were mistakenly classified as Wholesale investors. In compliance with Australian regulations, Binance notified these users and closed out their derivative positions. Binance will compensate the affected customers for their losses, with approximately 500 users reportedly impacted.
Our team identified a small number of Australian users who were incorrectly classed as ‘Wholesale Investors’ on Binance.
As per Australian regulation, we were required to inform these users and close any of their own derivative positions with immediate effect.
— Binance (@binance) February 23, 2023
According to Binance's official website, Oztures Trading Pty Ltd, also known as Binance Australia Derivatives, holds the Australian Financial Services License No. 425165, allowing it to offer over-the-counter (OTC) derivatives. Derivatives are complex high-risk products suitable only for Wholesale clients as defined in the Corporations Act 2001.
As shown in the diagram below, Wholesale clients include professional investors, high net worth individuals, and corporate entities, who must provide evidence of their net assets or relevant trading experience. The entry threshold is very high, with the net assets of high net worth individuals needing to be at least 2.5 million Australian dollars, approximately 1.7 million US dollars.
