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"Binance Restricts Access to Customer Funds: Limits to US Employees Only, in Agreement with SEC"

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Binance.US Agrees to SEC Demand to Restrict Access to Customer Funds

The Agreement

Binance, along with Binance.US, has reportedly entered into an agreement with the United States’ securities regulator to ensure that customer funds cannot be accessed by anyone except authorized Binance.US employees. The agreement, which still requires the federal judge’s approval, mandates thatnone of theexecutives of Binance Holdings should have access to private keys for Binance.US wallets. Additionally, the parties must ensure the Binance.US’s Amazon Web Services tools are inaccessible to those who do not hold authorization or are not Binance.US employees.

The Background

The agreement came after the Securities and Exchange Commission (SEC) sued Binance, Changpeng Zhao (the CEO and Founder of Binance), and Binance.US's operator last week.The lawsuit is a dramatic escalation of the SEC's crackdown on the cryptocurrency space, and Binance was not the only exchange to face such actions, as Coinbase was probed in a similar fashion. Binancehalted all dollar deposits last week, following SEC's request to seize its assets.

The Other Provisions

Apart from restricting access to customer funds, the agreement mandates that Binance.US create new crypto wallets that no one associated with the global exchange can access.The company should also provide additional information to the SEC as part of the expedited discovery schedule that the parties are required to agree upon. As of now, neither the SEC nor Binance.US have released any comments regarding the agreement, which will only come into action after the court's approval.

In today's world where cryptocurrencies are becoming more mainstream, startups that operate in this space need to keep a close eye on the regulatory developments. The recent crackdown by SEC on Binance and other exchanges is a clear indication that the US government is paying close attention to the cryptocurrency space. For a new business, it's essential to comply with the regulatory requirements from the very beginning to avoid any legal issues. The settlement agreement reached by Binance.US with SEC underscores the importance of ensuring customer funds' safety and restricting access to wallets.

Start-ups that operate in this space need to proactively stay ahead of the regulatory curve by understanding the legal frameworks and complying with them. It's also crucial to set up a robust and secure system to protect customer assets and confidential information. As the government takes a closer look at this sector, new businesses must be vigilant to avoid any potential legal entanglements. By doing so, they can build trust and establish themselves as reliable players in the cryptocurrency market.

Article First Published at: https://www.cnbc.com/2023/06/17/binance-sec-agree-to-allow-only-us-employees-to-access-customer-funds.html

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