The Binance Team Tells People How To Bypass China's Crypto Ban

By volume or assets, Binance is the largest cryptocurrency exchange in the world. In 2021 alone, it conducted trades totaling $9.5 trillion. Nevertheless, it isn't intended to be permitted to operate in China, where cryptocurrency trading was outlawed in 2021.

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Changpeng "CZ" Zhao, the founder of Binance, has praised the exchange's know-your-customer (KYC) procedures as a $1 billion investment. These are intended to, among other things, deter users from using the platform, especially Chinese citizens.

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Yet, posts in Binance's official Chinese-language chatrooms demonstrate that users frequently circumvent Binance's filters to mask their country of residence or origin.

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Hundreds of conversations from a Discord server and a Telegram channel run and managed by Binance were obtained, translated, and evaluated by Trade Algo. These groups had more than 220,000 individuals registered, and anyone who joined and registered could view them for free. There were no access restrictions up until the end of March, which is how Trade Algo was able to examine texts from 2021 to 2023.

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The conversations Trade Algo examined were from accounts described as Binance workers or Binance-trained volunteers known as "Angels," and in them, they shared methods for getting around Binance's KYC, residency, and verification processes.

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Some of the methods that staff members and volunteers have discussed entail providing fraudulent information, such as forged bank documents or addresses. Others merely involve system manipulation on the part of Binance.

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Workers, volunteers, and clients also distributed documentation and video tutorials that demonstrated how mainland citizens might lie about where they lived in order to obtain a Binance debit card, that would effectively convert their Binance cryptocurrency into a standard checking account.

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Regardless of the approach, Binance's Chinese consumers assume a big risk because the country has banned cryptocurrency since 2021 and crypto exchanges since 2017. Some items that Chinese citizens want access to are likewise prohibited by Chinese legislation.

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The effectiveness of Binance's anti-money-laundering initiatives is also called into doubt by the methods used with and among consumers. KYC and anti-money-laundering initiatives are crucial for global companies like Binance in ensuring that clients aren't involved in unlawful behavior like terrorism or fraud.

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Financial regulation experts expressed alarm over how readily Binance's KYC and AML processes may be bypassed.

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Sultan Meghji, a professor at Duke University and a former chief innovation officer for the FDIC, said to Trade Algo, "If I had an eight out of 10 concerns about Binance from a regulatory standpoint and from a global safety standpoint, this takes it to a 10 out of 10."

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Meghji's worries about Binance's inadequate implementation of its KYC policies go beyond China. He remarked, alluding to some of the methods disclosed, "I think specifically about the repercussions for national security of how terrorists, thieves, money launderers, cyber guys in North Korea, Russian billionaires, etc., could use this to obtain access to this infrastructure."

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Jim Richards, a Wells Fargo anti-money-laundering executive, concurred that the methods for getting over Binance's KYC restrictions might have effects beyond of China. "What about the Iranian, Russian, or North Korean customers? Richards enquired.

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A spokesperson for Binance told Trade Algo in response to a request for comment on the findings in this article: "We have taken any action against staff who may have violated our internal policies, including improperly soliciting or making recommendations that weren't allowed or consistent with our standards. We have strong regulations that call for all users to successfully complete KYC by giving us information about their home nation and other forms of personal identification.

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The representative said, "Binance staff would be immediately terminated or inspected if found to have broken such regulations. It is specifically banned for employees to suggest or assist users in bypassing their local laws & regulatory policies."

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The Binance workers and Angels mentioned in this story were also contacted by Trade Algo. One advised Trade Algo to speak with Binance's PR department. The others remained silent.

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Public adherence, personal evasion

Bloomberg stated that Binance had stopped allowing Chinese mobile phone numbers to signup in 2021 after China outlawed bitcoin. Bloomberg was informed by the company that it has also blacklisted IP addresses from China.

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Yet, Chinese users have persisted in looking for ways to sell on Binance, including using guidance offered by staff members and volunteers. Some of these instructions make use of encrypted networks, or VPNs, which employ software to mask the user's location and send messages across China's internet censorship.

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On Binance's Discord service, a user inquired in May 2022, "How can mainland users signup now?

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They were instructed to turn on their VPN, register as a Taiwanese resident, and then change their nationality back to Chinese by a person going by the handle Yaya who claimed to work for Binance. Also, the employee advised against utilizing VPN nodes in the "United States, Singapore, and Hong Kong," where Binance explicitly bans access to some items.

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Neel Maitra, a partner at the law firm Wilson Sonsini and a former senior special counsel for crypto matters at the SEC, advised using a VPN.

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According to Maitra, "most guiding principles by exchangers also account for typical evasive behaviour." While it is true that an exchange cannot always prohibit or successfully police all infinite permutations of evasion, I believe that the majority of regulators would demand that they patrol against the more prevalent evasive types.

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In order to identify individuals in "restricted and sanctioned locations who had access to powerful masking techniques such VPNs," Binance informed Trade Algo that it has put in place "advanced detection measures."

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Other times, a VPN is not necessary for the guidance.

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In December 2022, a user with the handle Stella, who'd been identified in the company's online marketing materials as the community manager for Binance, posted messages in a server-wide announcement channel outlining how users could access Binance services by using a specialized "VPN-free" domain name and downloading an app that appeared to be made especially for users in mainland China.

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An email with the domain binance.com was used to send the link to Trade Algo for this app. Without utilizing a VPN, a reporter was allowed to obtain the application from within China and register with a Chinese phone number. The program allows users to buy cryptocurrency from other Binance customers at prices expressed in Chinese yuan using the well-known Chinese apps WeChat or Alipay. Tencent, which hosts the app, provides a cloud computing service that is well-liked in China. Additionally, it offers choices for Chinese identity document submission for KYC verification.

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According to Binance, the app is not tailored specifically for Chinese users. A representative stated, "'Binance does not offer a 'Binance Chinese Android app." "Just one official Binance exists."

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According to texts examined by Trade Algo, staff seem to divert inquiries concerning KYC to Binance Angels more frequently, putting the business at risk of regulatory infractions. Angels "are not representatives of Binance," Binance has clarified.

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In a blog post on the Binance website, an Angel stated, "Our position is limited, and we do never speak on Binance's behalf."a

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On the other hand, a Binance job page states that the training for Chinese-speaking Angels takes up to a year. They operate under the direction of Binance staff after being screened, trained, and distributed across the Telegram and Discord groups.

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Reuters has previously covered how Binance gives its Angels cryptocurrency discounts in exchange for their labor.

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In a Trade Algo-reviewed interaction from October 2022, an Angel offered advice to a user who'd been having problems using the specific Binance webpages that were meant to function inside of mainland China.

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The user was instructed by the Angel to try again after switching their VPN to a different area.

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"How do users create accounts in mainland China?

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The same Angel replied, "Register using an international email address," and then instructed the user to select Taiwan as their place of residence.

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The volunteer gave other clients the same advice. Another alleged resident of mainland China enquired in April 2022, "What may I do if evidence of residence is required? Can I move to a different residence? ”

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This Angel answered, "Proof of registration residence is not necessary."

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Messages dated March 2022 reveal that in another instance, a fictitious mainland resident expressed concern about submitting their Chinese identity documents. The same Angel informed the user that Binance would not object if they submitted a Chinese identity card while claiming to be in Taiwan.

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Although [Binance] doesn't conduct business in the mainland, it cannot prevent players from the mainland from playing bypassing the huge firewall, the Angel reassured the user.

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Users can learn about the blockchain, the exchange's offers, and best practices from angels.

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Two Binance Angels demonstrated how Chinese consumers may take part in Launchpad, Binance's IPO-like product for new cryptocurrency tokens, in a question-and-answer lesson from April 2022.

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Chinese legislation forbids Chinese citizens, including a specific restriction on initial coin offerings, from taking part in first exchange offerings.

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How can users from the mainland participate in Launchpad?

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Many users claimed it was not possible.

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However, other Q&A participants, including another Angel, claimed that setting up a foreign corporation or using foreign KYC would allow mainland customers to evade Binance's restrictions.

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The session-leading Angel congratulated the user who correctly identified "overseas company" the quickest.

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Binance clarified that the Angels really aren't employees in a reply to Trade Algo regarding the findings in this report.

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In the same way that community ambassadors work on sites like Wikipedia and Reddit, the Binance Angel Program is a public ambassador program. The ability to speak on behalf of Binance and access to its tools and internal processes are both denied to Binance Angels. If a Binance Angel is found to be spreading suggestions that are against the law or our corporate regulations, they will be promptly kicked out of the program.

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The Palau avoid

In an effort to update physical identity cards, Palau began its digital residency in 2022, introducing an NFT-linked identification card that costs a few hundred dollars each year.

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When Zhao visited the Pacific Ocean archipelago in 2022, he referred to the project as "extremely inventive."

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Nonetheless, people from all over the world can access Binance utilizing Palau's program by using their Palau "residency" to conceal their citizenship and place of residence.

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According to Telegram and Discord chats Trade Algo investigated, customers openly alluded to Palau's program as a way to get around Binance's nation-specific regulations.

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According to a Bhattacharya client who worked with them, when users questioned how to obtain goods and currencies that are typically unavailable to Chinese citizens, Angels directed them to a tweet from the client relationship manager of Binance in October 2022. This tweet, which has since been removed, contained a link to a third-party Mandarin YouTube tutorial on how to bypass Binance's European Union KYC requirements by claiming residency in Palau, even if the user resided outside of the EU.

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By "passing," customers were able to apply for Binance's limited Visa debit card, which allows them to convert their cryptocurrency into fiat money that can be used anywhere. 

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The third-party video specifically explains to consumers how to sign up with Palau, buy the Palau ID, and upload the ID to Binance's exchange. It then instructs the user on how to establish a placeholder Austrian address for mail forwarding. Then it shows a purportedly real bank statement from the German bank account of the video's creator and describes how to change it to reflect the Austrian address. According to the producer of the video, all you need to fake the bank statement is a PDF editor.

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Emails from the Discord server suggest that a person who claimed to be in mainland China asked about the Binance Card in November 2022. They were pointed toward the film by an angel who said it would aid in their acquisition.

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Binance claims it had no involvement in the production of the video guide in a reply to Trade Algo. "That film is not a piece of material that Binance owns, and neither is its author a Binance worker or even a Binance Angel," the statement reads.

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Even though some of these talks did not specifically mention this video, the method of utilizing false Austrian credentials was popular enough to be addressed in additional chats in the months of November and December 2022.

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An employee of Binance cautioned a potential customer against applying "casually" for the Binance debit card, stating that "Some customers stated their accounts were blocked after attempts to move their addresses to prohibited countries."

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By using Austrian bank statements, the consumer reassured the Binance staff member.

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Similar complaints about not being able to obtain a Binance debit card were made by consumers in December 2022 messages on Binance's Chinese-language Telegram group.

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One person said, "If you're Chinese, you can't."

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They were directed to a separate video by another user, which exploited an account associated with a German bank and used the same bogus proof of address.

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What if you are unable to provide the necessary documentation?

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", the second video's producer posed as a rhetorical question. "I have a Telegram group you can join. This service, which can assist you personalize this address certificate, is offered by someone in my group.

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The developer added that mainland users may also purchase "proof of address" or "overseas professional customisation" on the Chinese marketplace Taobao.

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Experts in compliance and regulation expressed concern to Trade Algo about how simple it was for Binance users to use false KYC credentials.

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"When I hear this while seated at the main Justice or National Security Council, I am quite anxious. I become really worried about this if I'm at the IRS, Meghji admitted to Trade Algo.

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According to Richards, the usual financial partners of the exchange, such as Visa and a customer's bank, would be concerned about any unlawful access to Binance. For instance, it might raise some questions if a user attempted to withdraw money from Binance into a JPMorgan Chase bank account.

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Trade Algo shared a number of particular postings and messages in the course of asking Binance for feedback on the accuracy of all the material in this piece. After Trade Algo gave them to Binance, all of those tweets and messages—including the one from the Binance employee sharing the how-to video—were removed.

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Moreover, tweets alleging that certain users' Binance debit had been stopped appeared on Twitter hours after Binance reacted to Trade Algo.

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The staff member advised the client to address their concerns with Binance's banking