Binance To Remove Prime Brokerages Loophole

Binance is closing a loophole in its Link Program that allowed some prime brokerages to take advantage of the multi-tiered fee structure provided by Binance.

The change came after some Binance Link clients reportedly took advantage of the program’s multi-tiered fee structure through arbitrage.

According to a report from Bloomberg, top-tier brokerage partners of the system, which had nine tiers in total, enjoyed discounts on trading fees that could be arbitraged or passed on to clients of those platforms by lumping many accounts together and sometimes even trading on their behalf.

This allowed some platforms to gain additional revenues by pocketing the difference between their exclusive top-tier price benefits and whatever they would charge their customers.

Platforms participating in the Link Program could also attract customers by passing on their savings to prospective clients and offering attractive trading fees not found on the retail market.

The Broader Crackdown At Binance

Although this clampdown on the arbitrage schemes employed by some Link Program clients is specific to institutional clients, it signals broader attempts by the exchange to crack down on misuse of the platform.

On June 26, Binance posted an update to users of the platform, encouraging them to report any instances of suspicious activity, such as fee arbitrage or Know Your Customer breaches by institutional accounts. As an incentive, users will be rewarded for reporting verified cases of policy violations and bad actors.

Regulatory Woes

Binance continues to stress its commitment to compliance in the face of regulatory woes across jurisdictions.

Former CEO Changpeng Zhao entered into a $4.3-billion settlement with the United States Department of Justice in November 2023 for allegedly violating the Bank Secrecy Act and provisions tied to Anti-Money Laundering regulations in the country.

Although Binance.US is a separate company from Binance, it also faces regulatory headwinds from U.S. lawmakers. 

In June, officials from North Dakota revoked Binance.US’ money transmitter license, effectively banning the exchange from operating in the state.

Binance also agreed to exit Nigeria earlier this year amid accusations of tax evasion and money laundering from the Nigerian government, which also accused Binance of causing shortfalls in the local Nigerian currency.

More recently, the exchange platform was fined $2.25 million by India’s Financial Intelligence Unit (FIU) for allegedly breaking Anti-Money Laundering regulations in the country.