Binance is addressing a loophole in its Link Program that certain prime brokerages exploited to benefit from its multi-tiered fee structure.
According to a Bloomberg report, the top-tier brokerage partners in the nine-tier system enjoyed significant discounts on trading fees. These discounts could be arbitraged or passed on to clients by aggregating multiple accounts and sometimes even trading on their behalf. This practice allowed some platforms to increase their revenues by pocketing the difference between their exclusive top-tier price benefits and the fees they charged their customers.
Binance’s eligibility criteria to apply as a Link partner. Source: Binance
Participants in the Link Program could also attract customers by offering these savings to potential clients, providing competitive trading fees not available on the retail market.
A broader crackdown at Binance
While this crackdown on arbitrage schemes is focused on institutional clients, it is part of a larger effort by Binance to prevent misuse of the platform.
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On June 26, Binance posted an update urging platform users to report any suspicious activities, such as fee arbitrage or Know Your Customer (KYC) breaches by institutional accounts. Users will be rewarded for reporting verified cases of policy violations and bad actors.
Regulatory challenges
Binance continues to emphasize its commitment to compliance amidst regulatory challenges across various jurisdictions.
Former CEO Changpeng Zhao reached a $4.3 billion settlement with the United States Department of Justice in November 2023 for allegedly violating the Bank Secrecy Act and Anti-Money Laundering regulations.
Although Binance.US operates separately from Binance, it too faces regulatory challenges from U.S. lawmakers. In June, North Dakota officials revoked Binance.US’s money transmitter license, effectively banning the exchange from operating in the state.
Earlier this year, Binance agreed to exit Nigeria following accusations of tax evasion and money laundering by the Nigerian government, which also accused Binance of contributing to shortfalls in the local currency.
More recently, India’s Financial Intelligence Unit (FIU) fined Binance $2.25 million for allegedly violating Anti-Money Laundering regulations in the country.
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