Introduction
The world's largest cryptocurrency exchange platform is easily in the news from time to time. In this case, there are news making the round that Binance locked up some accounts belonging to a few users from Palestine. When the news of this alleged freezing of assets started going round, the exchange's CEO Teng had to address the matter using his x official account to clarify what really happened.
Teng explained that the decision to withhold assets of some users from that region is the result of an investigation into their activity on the platform. The investigation has linked some of the affected accounts with funding of illicit activity which was considered money laundering. As a result of the fraudulent transactions conducted through those Binance accounts, the exchange has to freeze the assets to comply with international monetary laws such as those of money laundry.
In addressing the situation, Teng made it clear that the decision to lock up funds in those accounts has nothing to do with the current social unrest caused by the war happening between Isreal and Gaza which has caused the death of thousands of Palestinians in that region. Below is a quote of what Teng said to clarify the situation:
FUD. Only a limited number of user accounts, linked to illicit funds, were blocked from transacting. There have been some incorrect statements about this. As a global crypto exchange, we comply with internationally accepted anti-money laundering legislation, just like any other financial institution. We will continue to educate users on how to safely and securely transact on our platform. source
Binance at odds with authorities
Binance has had more than enough share of issues with various countries and governments. Within its exchange is robust P2P market which enables users from all over the world to trade assets and convert their crypto to fiat. Many countries have had to fight this business especially since the SEC in US accused the exchange of doing business illegally.
Many other countries have followed suit in tackling Binance, challenging its right to do business even though they are not originally registered to trade in those countries. Not too long ago, Nigeria for example held two Binance representatives that visited the country to negotiate on Binance operations. Although the representatives are no longer in Nigerian custody, that incident highlights the growing hostility towards Binance and other crypto companies around the world.
In the case of Nigeria, the authorities accused Binance of allowing its platform to be used for fraudulent transactions such as financing of terrorism. Although Binance denied it and refused to hand over user data to the authorities, the situation led to Binanc closing its P2P market for Nigerian users.
It is therefore not surprising to see the largest crypto exchange tighten up its KYC processes and transaction monitoring. In this case, they have to take action to stop some accounts from continuing to transact when they believe from their findings that there is something fishy about the transactions.
CEXs and censorship
While it is not wrong to fight financial crime or to stop bad eggs from using crypto exchanges, the issue of censorship could affect even users that are doing legitimate transactions. If and when such happens, then the unfortunate side of centralized crypto exchanges could bite hard on those affected. The truth is that any assets stored on exchange platforms like Binance could be frozen for any reasons.
The issues of asset ownership comes into sharp focus once again. When a user signs up in any of these centralized crypto exchange platforms, they are in essence sharing the control and ownership of assets with the platform. They have a copy of your keys which could be used to access digital tokens in the wallet. In the case of disagreements or allegations of fraud like the above example, an exchange platform like Binance could simply lock the user away from the wallet.
So generally, each use user should check and understand the risks involved in allowing a third-party to be in control of their assets. Ownership becomes a big problem. Only you should have your keys and that is not possible in a centralized exchange platform. So how is it possible to avoid censorship especially if you have valuable assets to store?
Decentralized crypto exchange platforms are best if you wish to avoid experiencing some form of censorship in the future. With a decentralized exchange, only you have access to your keys. The exchange does not keep a copy of your key. You are fully in charge of the wallet. So all your assets stored in there is only accessible by you. The security of your assets and all the operations in it can only be done by you.
It is always recommended to use decentralized exchanges over centralized ones so that you do not run any risk of having your assets frozen in the future by the exchange especially when you have done nothing illegal.
Note: Thumbnail is mine
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