CNBC: Binance Staff is Showing Users How to Evade China Crypto Ban

Binance remains the biggest crypto exchange worldwide by volume and assets. In 2021, the platform processed trades worth $9.5 trillion. However, it’s not allowed in China, which banned cryptocurrency trading that year.

According to Binance founder and CEO Changpeng “CZ” Zhao, Binance’s KYC systems cost billions to develop and implement. They are supposed to deter users based in China.

“Angels” share techniques to circumvent KYC

It seems the exchange’s KYC protocols have left something to be desired in the way of effectiveness. CNBC reported it had gotten access to, reviewed, and translated hundreds of messages from a Telegram group and a Discord server, which Binance controls and operates. The groups had almost a quarter of a million users in total and were freely accessible to anyone.

The messages in question come from accounts belonging to Binance volunteers or staff members called “Angels.” The Angels shared techniques to circumvent Binance’s verification, KYC, and residency identification systems.

False addresses, fake bank documents, and more

The volunteers and employees recommended approaches such as entering false addresses, forging bank documents, manipulating Binance’s systems, and more.

Users, employees, and volunteers shared documents and video guides showing residents of mainland China how to forge their location so they could get a Binance debit card issued. This card makes a crypto account with the exchange equivalent to a traditional checking account.

Implications beyond China

Financial regulation experts warn that the fact it’s so easy to thwart the exchange’s KYC and AML efforts may have implications beyond China. According to Jim Richards, AML executive at Wells Fargo, the techniques could be applied by customers from countries like North Korea and Russia.

When approached for comment by CNBC, a Binance spokesperson stated:

We have taken action against employees who may have violated our internal policies including wrongly soliciting or making recommendations that are not allowed or in line with our standards. We have strict policies requiring all users to pass KYC by providing us with their country of residence and other personal identification information.

Use of a VPN advised

A Binance employee told a user in May 2022 to get a VPN and sign up as a resident of Taiwan, then change their nationality back to Chinese.

However, the employee advised against using VPN nodes in countries like Singapore, Hong Kong, and the US. The exchange officially denies access to specific products in those countries and territories.

Binance claims to apply sophisticated detection protocols to eradicate users in sanctioned or restricted countries, who have access to VPNs and other advanced masking tools.

An app for access from Beijing

There is an app specifically designed for users in mainland China who want to sign up with Binance. A community manager working for the exchange posted community-wide messages on using a specific VPN-free domain name and downloading the app in December 2022.

According to CNBC, Binance staff seems to refer all KYC-related questions to the Angels, creating a gap between the exchange and potential legal violations. However, Binance has drawn attention to the fact that the Angels do not actually represent it.

How to get in Launchpad and other FAQs - answered

In April last year, Binance Angels showed Chinese customers how to take part in Launchpad, the exchange’s IPO-like product for new digital assets. They could do that using foreign KYC or by registering a foreign legal entity.

Dodging KYC via Palau

The Palau archipelago introduced a digital residency program last year in an attempt to modernize physical ID cards. Their ID card is linked to an NFT and costs a few hundred dollars a year. CZ commended this as an innovative effort.

However, the program makes it possible for people across the globe to use their Palau “residency” to conceal their true country of origin.