Binance loophole may allow users to skirt Singapore ban

Binance has dominated the headlines this past week. It was issued a warning by the Monetary Authority of Singapore (MAS) for providing payment services and soliciting business from Singaporeans without having a license to do so. The financial regulator then went on to officially instruct the crypto exchange’s global platform, Binance.com, to halt payment services to Singapore residents.

In a statement to Tech in Asia for a previous story, Binance CEO Changpeng Zhao said that the firm was “taking actions proactively in regards to global compliance/regulatory landscape changes.”

Binance CEO Changpeng Zhao / Photo credit: Binance

Earlier this week, Binance announced that it had taken steps to comply with MAS’ most recent orders. The firm’s international platform said it would remove Singapore-dollar trading pairs from its peer-to-peer (P2P) marketplace by September 10, 12 p.m. local time, and will not offer or accept payment options in Singapore dollars from that date. The global app will also be removed from iOS and Google Play app stores in the city-state.

However, Tech in Asia has found that Binance.com had quietly added a placeholder currency called “Local” that allowed users to trade at local exchange rates, though it is unclear when the feature was made available.

The new placeholder could have helped Binance to circumvent the heightened regulatory scrutiny by allowing users to trade at local exchange rates without specifying exactly which currency they were dealing in. MAS’ order directing Binance to cease payments services, however, includes “any SGD payment options, regardless of how they are named,” the central bank said in a statement to Tech in Asia.

We reached out to Binance for comment on details about the “Local” placeholder, including when it was created and what functions it was designed to serve, but did not receive a response.

A check by Tech in Asia found that the feature has been disabled as of September 10, 12 p.m. local time. That said, Singapore vendors appear to have discovered another loophole: listing their services under the Brunei dollar, which shares the same exchange rate as the Singapore dollar.

One such vendor explicitly posted instructions guiding Singapore account holders on how to begin a transaction at the Brunei dollar rate.

Accounts that advertise as Singapore-based vendors listed under the Brunei dollar.

A potential workaround – no longer

Before going further, we need to understand how Binance.com offers payment services to Singaporeans.

Since Binance.com has been operating in Singapore without a license, users in Singapore cannot make direct deposits into their Binance wallets via Singapore dollar-denominated bank accounts. Instead, traders have to go through Binance.com’s P2P marketplace to fund their wallets on the exchange.