Binance to pay $1.7m to Brazilian regulator for violating derivatives laws

Binance, through its Brazilian subsidiary B Fintech Serviços de Tecnologia Ltda, agreed to pay authorities $1.7 million.

The settlement included a lawsuit filed with Brazilian regulator Comissão de Valores Mobiliários over alleged violations of local derivatives laws. The CVM’s investigation of Binance in Brazil dates back to 2020, when the exchange was first ordered to halt offering derivatives in the country.

Under Brazilian law, derivative contracts are classified as securities and require certain regulatory approvals. However, Binance, which operates through B Fintech, did not have this authority, which prompted the CVM to take action.

Although Binance initially complied with the rules by removing the Binance Futures service from its Brazilian website, it reportedly continued to offer the product with workarounds such as granting access to customers who changed the website language to Portuguese.

Following Binance’s partial compliance, CVM closed the first case. However, the regulator initiated a second administrative process against Binance in December 2022, thanks to the temporary solution it provided to its customers. As part of the settlement terms for the second case, Binance proposed a $370,000 fine in August 2023, which CVM rejected.

The agency found the initial proposal to be inadequate considering the seriousness of the allegations. In particular, the regulator found that the initial terms did not adequately address the legal breaches.

After further negotiations, Binance submitted a revised offer in February of this year, which included a payment of $1.7 million. After reviewing this new offer, CVM found it satisfactory and legally sound, which led to the acceptance of the deal.

Binance’s global regulatory woes

Globally, Binance has faced increasing regulatory pressure. In the United States, the Commodity Futures Trading Commission accused Binance of failing to properly register its derivatives products, echoing the problems it faced in Brazil.

Nigerian authorities have also detained Binance executives in the country, accusing the exchange of violating anti-money laundering provisions and contributing to currency devaluations. Binance has also come under scrutiny from European regulators, leading to the exchange exiting some markets such as the Netherlands.

In Brazil, Binance has been trying to solidify its operations by acquiring local entities that are fully compliant with Brazilian regulations, including the acquisition of Sim;paul Investimentos, a brokerage firm licensed by the CVM and the Brazilian Central Bank.