Binance warns of loss of funds for Litecoin transactions that use the MWEB feature

  • Binance joins South Korean exchanges in banning this new privacy feature.
  • Group files legal action against Binance.US following Terra crash.

Last month, Litecoin developers launched an optional privacy feature on Litecoin transactions. The Mimblewimble Extension Blocks (MWEB) feature enables Litecoin users to hide transaction data. However, it doesn’t slow down the transaction processing speed. Following the launch of this feature, all South Korean exchanges (such as Bithumb and Upbit) delisted the coin last week.

These exchanges claim that this feature will prevent them from monitoring user transactions. Hence, they would be disobeying anti-money laundering policies. In contrast, Binance is yet to delist the coin. But it warned its users not to enable this feature when making their Litecoin transactions. The announcement adds that users that enable the feature for the Litecoin transfers risk losing their funds.

The reason for this Binance warning

Compared to South Korean exchanges, Binance supports privacy-focused coins. A proof of this is the listing of Monero, Zcash, and other popular privacy coins on its platform. Hence, it is unlikely that this Binance warning has anything to do with regulatory compliance.

Instead, the most probable reason for this announcement is the inconvenience. It would be inconvenient for Binance to manage Litecoin transactions with the MWEB feature and those without it. It is important to note that no one can identify the crypto addresses involved in Litecoin transactions utilizing the MWEB feature.

A part of the Binance warning reads, “we won’t return or acknowledge the receipt of all LTC deposits made through the MWEB feature to Binance. We are doing this because we can’t confirm the sender’s address. Thus, the sender and receiver would lose such funds.”

Group files class-action lawsuit against Binance.US

A group claiming to represent the interest of American crypto holders has filed a class-action lawsuit against Binance.US. Binance.US is the US subsidiary of the popular crypto exchange, Binance. The group accused Binance.US of selling unregistered securities to buyers. Thus, making them lose their hard-earned cash.

The complainants did the filing on June 13 in the Northern District of California. The group also claimed that Binance.US’s business model is based on enabling “the illegal sale of unregistered securities to several us crypto investors.” In addition, the filing also states that Binance.US was actively promoting UST sales to make huge profits from increased transaction volume involving this stablecoin.

The complaint added that Binance.US was selling UST without having the license to do so as a broker. Thus, Binance.US committed a criminal act under US securities laws. Nevertheless, Binance.US is yet to make any official statement regarding this matter.

After-effects of the Terra crash

There have been a lot of effects that followed the crash of the Terra network. Over $40B was erased from the overall crypto market cap within 24 hours of the crash. This legal action could be the first of many other similar ones following the crash of the Terra network last month.

The success of this trial would provide greater clarity on the legality of decentralized finance (DeFi). It would also define who should be responsible in case things go south.