Local traders told Reuters that they continued to use the platform’s services after the embargo was renewed, using a VPN

Media: Binance served clients from Iran bypassing US sanctions

11.07.2022 - 13:40


2 min

What’s new? According to a Reuters investigation, cryptocurrency exchange Binance served trades of Iranian clients despite US sanctions and a ban on doing business in the country. Some traders from Iran told the outlet that they were using the platform until September 2021, losing access only after imposing a mandatory identification procedure. Previously, only an email address was sufficient to register.

Reuters’ investigation

Sanctions against Iran. In 2018, the US authorities re-imposed sanctions that had been suspended three years earlier as part of the Iran nuclear deal with the world’s leading nations. Later that year, Binance informed Iranian traders that it would no longer serve them and advised them to liquidate their accounts.

How did the exchange circumvent the ban? Binance’s holding company is based in the Cayman Islands. Representatives of the exchange say that it does not have a single head office. Binance does not disclose details about the structure behind its main exchange, which does not accept customers in the United States. US users are directed to a separate exchange called Binance.US, which is controlled by Binance founder Changpeng Zhao, according to a regulatory filing in 2020.

According to lawyers, this structure means that Binance is protected from direct US sanctions that prohibit US firms from doing business in Iran. Iranian traders used Binance’s main exchange, which is not a US company. As such, Binance risks being subject to so-called secondary sanctions, which aim to prevent foreign companies from operating in countries hit by US restrictions. Secondary sanctions not only cause reputational damage but could also cut off the company’s access to the US financial system.

Binance and VPN. According to traders, the popularity of Binance in Iran was due to the ease with which users circumvented restrictions by using VPN servers. Investor Mehdi Qaderi said that he used a VPN to trade around $4 000 worth of cryptocurrency on the exchange in the period up to August 2021.

In 2019, Zhao supported the use of VPNs, posting on Twitter that it was “a necessity, not optional.” The post was later deleted. However, in July 2021, Binance published a “Beginners’ Guide to VPNs” on its website.

In May 2022, Binance strengthened its know your customer (KYC) procedures to comply with sanctions restrictions.

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