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The head of the National Union for the Protection of Consumer Rights wrote to the Central Bank with a request to take action against the crypto exchange Binance and its head, which allegedly organizes collapses and enriches itself at the expense of traders’ losses
The National Union for the Protection of Consumer Rights sent a letter to the Bank of Russia (at the disposal of RBC-Crypto) with a request to restrict the activities in the country of the world’s largest cryptocurrency exchange in terms of trading volume, Binance. Let’s figure out what the claims of the NSZPP against Binance are.
The arguments of the NSZPP
The letter, signed by the chairman of the NSZPP Pavel Shapkin, says that Binance has a global influence on the prices of cryptoassets on other cryptocurrency exchanges, and its head Changpeng Zhao has a monopoly on the pricing of digital assets.
“Changpeng Zhao has unlimited opportunities to open sell deals (artificially creating assets allegedly borrowed from himself), and unlimited opportunities to open buy deals for his own issued cryptocurrency BUSD. Thus, Binance has truly unprecedented opportunities to manipulate the global rates of cryptocurrencies, “- noted in an appeal to the Central Bank.
The CEO of Binance, according to Shapkin, is capable of “at any time and at its discretion” collapse the rate of “any cryptocurrency.” The letter also accuses Binance of organizing two major crypto market crashes – in May and December.
“The client’s margin account is forcibly closed, and his crypto assets are transferred at an artificially low value into the pocket of Changpeng Zhao. By depriving clients of their invested funds, he became a billionaire, ”Shapkin said.
In May and December 2021, the cryptocurrency market did experience two major crashes. In mid-May, the price of bitcoin per day decreased by more than a third and for the first time since the beginning of the year dropped to $ 30 thousand. Due to the massive liquidations that followed a sharp drop in quotations, traders lost more than $ 2.4 billion. In early December, the bitcoin rate per day dropped by more than 20%, to $ 42 thousand. This led to massive liquidations of traders’ positions for $ 2.5 billion.
Forbes estimates the fortune of Changpeng Zhao at $ 1.9 billion.According to The Wall Street Journal, the fortune of the head of Binance may be significantly greater, since he is the largest shareholder of the cryptocurrency exchange, which, if it goes public, could be valued at $ 300 billion.
In November, Zhao revealed that he owns Binance Coin tokens and bitcoins, which he bought back in 2014. Also, the head of the exchange announced his readiness to donate 99% of his fortune. RBC-Crypto sent a request to Binance, but representatives of the crypto exchange did not comment on the letter.
In August, Binance already denied allegations of manipulating the cryptocurrency market. This happened shortly after an anonymous person accused Binance of manipulating the market in order to profit from long and short liquidations. He promised to provide proof of his words, but soon his post was removed. The user account has also been deleted.
RBC-Crypto sent inquiries to the Central Bank. The NSZPP, in response to a request from RBC-Crypto, was unable to provide evidence of manipulation of the crypto market by Binance.
Allegations are unsubstantiated
The Russian crypto community was skeptical about the letter from the NSZPP. The appeal does not contain documents with confirmation and research results, draws the attention of a member of the Commission on the Legal Support of the Digital Economy of the Moscow Branch of the Association of Lawyers of Russia Efim Kazantsev. It is also unclear where the head of the NSZPP got information about the personal influence of Changpeng Zhao on the rate of cryptocurrencies, he added.
“No supporting documents have been attached to the letter of the National Union for the Protection of Consumer Rights, sent to the Chairman of the Central Bank of the Russian Federation, and therefore the arguments presented in the letter look somewhat unfounded,” the lawyer said.
In addition, the letter appeals to the Central Bank as a regulator of non-credit financial organizations, but there are no cryptocurrency exchanges in the closed list of such organizations, Kazantsev added. “I don’t think Binance will be banned in this situation. In my subjective opinion, there are no legal grounds for this, ”he said.
Binance and trading volumes
In 2019, one of the world’s largest crypto funds, Bitwise, conducted a large study on the volume of trading in cryptocurrency exchanges, recalled Anastasia Bugrova, a lawyer at Guskov & Associates. According to the results of the research, Binance was one of the few exchanges that did not overestimate the volume.
Bugrova also noted that the trading platform itself cannot cause cascading liquidations of traders’ positions. Typically, such events occur when the market is overheated and the use of excessively high leverage for long positions.
Attention of regulators
The concern of consumers is fully justified, since the risk and limits of losses when investing in cryptocurrency cannot be predetermined, explained Elena Volchek, a lawyer at the RKT legal company. She recalled that in June 2021, the British financial regulator (FCA) banned Binance from working in the UK because the company was unable to confirm the transparency of its activities.
At the end of August, the FCA announced that the Binance trading platform had met all the requirements that were presented to it.
In 2021, Binance faced pressure from global financial regulators. In August, the crypto exchange limited a number of products for residents of South Korea and Malaysia. In July, the trading platform warned that it would stop trading cryptocurrency derivatives in Europe. Also, the crypto exchange became a defendant in investigations in Thailand, Singapore and the Cayman Islands.
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