On February 19, Binance released a notice of temporary system maintenance, halting trading and operations. The six-hour standstill was not well-received by the Binance community for fear of losing their hard-earned funds – and that was only the start of a rough week for the crypto exchange.
Binance suspended deposits, withdrawals, spot trading, margin trading, P2P trading, lending, redemption, asset transfers from sub-accounts, margin accounts, futures accounts, and fiat wallets following a temporary and unscheduled system maintenance.
The vagueness of the maintenance was met with much contempt from the crypto community, with Binance being bashed for not releasing information on the details of why they went offline for six hours.
FUD surrounds temporary Binance shutdown
Despite claims of Binance not being transparent and professional enough, CEO Changpeng “CZ” Zhao constantly provided updates on the development of the maintenance in a series of tweets:
Unscheduled system maintenance. Trading paused. Working on it.
— CZ Binance ???????????? (@cz_binance) February 19, 2020
Additionally, following a general climate of “fear, uncertainty, and doubt” (FUD), CZ reassured the community, urging them “not to panic” as crypto held and being traded on Binance is insured by their Secure Asset Fund for Users (SAFU).
This basically means that funds under Binance are stored in a separate cold wallet as a protection to their users and their respective funds in “extreme cases.”
Prior to releasing a post-mortem report on the unscheduled maintenance, Binance announced a giveaway of worth 50,000 BNB [US$1.103 million], Binance’s native currency.
1. 50,000 $BNB community giveaway
2. iOS v2.8.0 & Android v1.19.0 #Binance app
3. @moviebloc $MBL vote winner
4. Binance Lending phase 15
5. #Blockchain Scalability – Sidechains & Payment Channels with @BinanceAcademy
6. Open Letter to @YouTube Community#BUIDL pic.twitter.com/hUiTXdmKPe
— Binance (@binance) February 21, 2020
Although this gesture was intended to express gratitude towards the community for their patience when it paused trading, Binance was criticized for its performance and not prioritizing.
A Twitter user, Crypto Michael, said in response to Binance’s system maintenance that customers should have been their priority first and foremost.
Seemingly @cz_binance knows that it's because of high load during volatility.
That's step one.
Your customers are your basis. They don't care about many new features. They care about a working platform rather than 50x leverage or anything else.
— Crypto Michaël (@CryptoMichNL) February 19, 2020
“Your customers are your basis. They don’t care about many new features. They care about a working platform rather than 50x leverage or anything else. Get your focus straight,” he said.
Not approved by the MFSA
Right after the Binance FUD had subsided, Malta regulators announced that the exchange was not licensed to operate within the country.
On February 21, the Malta Financial Services Authority (MFSA) released a statement saying:
“Following a report in a section of the media referring to Binance as a ‘Malta-based cryptocurrency’ company, the Malta Financial Services Authority (MFSA) reiterates that Binance is not authorised by the MFSA to operate in the crypto currency sphere and is therefore not subject to regulatory oversight by the MFSA.”
The MFSA, in addition to denying operations in its country, also outlined that they will assess if Binance is carrying out any activities that could subject the company to regulatory oversight.
Binance headquarters location a mystery
In March 2018, CZ strongly alluded to an upcoming move to Malta. In an interview with Bloomberg, he said:
We are very confident we can announce a banking partnership there soon. […] Malta is very progressive when it comes to crypto and fintech.
Malta’s Prime Minister, Joseph Muscat, even took to Twitter to welcome Binance.
Welcome to #Malta ???????? @binance. We aim to be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world class fintech companies -JM @SilvioSchembri https://t.co/3qtAQjOpuQ
— Joseph Muscat (@JosephMuscat_JM) March 23, 2018
However, after several appeals to get an answer to the statement released by the MFSA, CZ responded and denied having an office in Malta, calling claims to the contrary a “mix of truth, FUD, and misconception.”
There is a mix of truth, FUD & misconception. https://t.co/9rMMAmc1G9 is not headquartered or operated in Malta. This is old news & has always been the case, hence there is quite a bit of FUD turning this into a breaking story. The community’s comments show that understanding. https://t.co/eXCq8rO1Ue
— CZ Binance ???????????? (@cz_binance) February 21, 2020
In addition to the clarification, CZ also said that people are not open-minded and that it is not necessary for Binance to have an actual office to operate. He further clarifies:
“Binance has a number of regulated entities around the world, either operated by our partners or by http://Binance.com directly. We work closely with regulators and comply with the rules in the places where we operate.”
Last year, when Binance’s Shanghai office was raided, Binance denied it and said,
“The Binance team is a global movement consisting of people working in a decentralized manner wherever they are in the world. Binance has no fixed offices in Shanghai or China, so it makes no sense that police raided on any offices and shut them down.”
Despite CZ’s claims to the contrary, Ted Lin, Binance’s chief growth officer, told Decrypt in a previous interview that, “We have offices in Malta for customer services, and some compliance people there, but it’s not the headquarters per se. It’s the spiritual headquarters.”
CZ: Ignore FUD, promote blockchain adoption
After the news broke, several crypto media channels published breaking news that reported the incident. To this, CZ responded by starting his post with “BREAKING,” confirming that “no licenses were granted to anyone in Malta.”
BREAKING: Nothing has changed in Malta, for Binance or any other crypto exchanges. No licenses were granted to anyone by Malta, as of yet.
Some media, even crypto media, has such a bad habit of releasing misleading news that only hurts their own credibility and our industry. https://t.co/C9MdCngx70
— CZ Binance ???????????? (@cz_binance) February 21, 2020
He later said that despite the latest confusion, Malta is a progressive country that promotes blockchain adoption and advised everyone to “ignore FUD, and work towards blockchain adoption.”