Binance, the world's largest cryptocurrency exchange, has taken action to close a loophole in its Link Program that allowed prime brokerages to exploit the platform's multi-tiered fee structure for their own financial gain.

The Link Program, which offers nine tiers of discounts on trading fees to top-tier brokerage partners, has been subject to abuse by some firms. These brokerages have been lumping together multiple accounts and even trading on behalf of clients to take advantage of the exclusive discounts meant for high-volume traders. By pocketing the difference between their discounted fees and the fees charged to clients, these brokerages have been generating additional revenue at Binance's expense.

The exchange has decided to put an end to this practice, effective July 1st. Binance's move is part of a broader effort to crack down on the misuse of its platform by institutional clients. The company has also encouraged users to report any suspicious activity, such as fee arbitrage or Know Your Customer breaches, promising rewards for verified cases of policy violations.

Binance's decision comes amidst ongoing regulatory challenges faced by the exchange. In November 2023, the company pleaded guilty to violating US anti-money-laundering and sanctions laws and agreed to pay a $4.3 billion penalty. More recently, Binance was fined $2.25 million by India's Financial Intelligence Unit for allegedly breaking Anti-Money Laundering regulations.

By closing this loophole, Binance aims to ensure the integrity of its platform and maintain compliance with regulatory requirements across jurisdictions. The move may also impact the revenues of many prime brokers who have been benefiting from the arbitrage scheme.