Binance US, the American arm of the world’s largest cryptocurrency exchange is facing a major setback in its operations as its banking partners plan to cut off its access to the U.S. dollar system. The exchange announced on Twitter that it had disabled its customer’s ability to buy and deposit U.S. dollars on its platform citing unjustified civil claims by the U.S. Securities and Exchange Commission (SEC) against its business.
The SEC filed a lawsuit against Binance and its founder Changpeng Zhao on Monday accusing them of violating U.S. securities laws by operating an unregistered securities exchange and offering securities-based swaps to U.S. investors without proper disclosure. The SEC also alleged that Zhao had a controlling interest in Binance global network of offshore entities which he used to move billions of dollars of assets between them.
The SEC sought an emergency motion for a temporary restraining order to freeze Binance U.S. dollar accounts and prevent Zhao from transferring any assets out of the country. The motion was denied by a federal judge on Wednesday but the SEC said it would continue to pursue its claims.
Binance.US said that its banking partners, which include Axos Bank, Cross River Bank, and the failed Silvergate, Signature, and Silicon Valley Banks, had “signaled their intent to pause USD fiat channels” as soon as June 13, effectively cutting off the exchange from the U.S. banking system. The exchange said that customers would not lose their money and could still withdraw their funds in stablecoins or other cryptocurrencies.
The move by the banks reflects the growing regulatory scrutiny and uncertainty surrounding the crypto industry in the U.S., especially after the SEC’s crackdown on Binance and Coinbase, the two largest crypto exchanges in the world. Coinbase also faces a lawsuit by the SEC for allegedly offering illegal securities-based lending products to its customers.
Some crypto firms in the U.S. have reportedly turned to smaller, regional lenders to open bank accounts amid the tightening regulations. However, these banks may not have the capacity or expertise to handle the complex and volatile nature of crypto transactions.
Binance.US stated that it was committed to serving the American market and was working hard to find alternatives for its customers. The exchange added that it would work with the SEC and other regulators to find solutions to any problems.
Binance US is one of Binance many affiliates, which conduct business in numerous countries all over the world. In several nations including Germany, Japan, Canada, and the UK. Binance has run afoul of regulatory requirements for allegedly operating without the necessary permits or licenses.
Binance has insisted that it abides by all local laws and regulations and that it is prepared to cooperate with authorities in order to promote innovation and expansion in the cryptocurrency industry.
So, what exactly is going on with Binance and the banks? Essentially, several major banks, including Barclays and Santander, have stopped allowing their customers to transfer funds to Binance through their banking systems. This means that customers who want to buy or sell cryptocurrencies on Binance will need to find alternative ways to transfer funds, such as using a credit card or a different cryptocurrency exchange.
The banks’ decision to restrict Binance’s access to the U.S. banking system is based on concerns over the exchange’s compliance with AML and KYC regulations. These regulations are designed to prevent money laundering and other financial crimes by requiring financial institutions to verify the identities of their customers and monitor their transactions for suspicious activity.
Binance has faced criticism in the past over its AML and KYC practices. In 2020, the exchange was accused of facilitating money laundering and other illegal activities by a group of law enforcement officials in the United States and Europe. Binance denied the accusations and said that it takes its AML and KYC obligations seriously.
Despite these assurances, it appears that the banks are still concerned about Binance’s compliance with the regulations. This is likely due to the fact that Binance is a relatively new player in the cryptocurrency industry and has grown rapidly in recent years. The exchange has also been the subject of several high-profile hacks and security breaches, which may have raised questions about its security protocols.
The banks’ decision to restrict Binance’s access to the U.S. banking system is a significant blow to the exchange’s efforts to expand its operations in the United States. Binance has been investing heavily in its U.S. operations in recent years, with the launch of Binance.US and the acquisition of several U.S.-based startups. The exchange has also been working to comply with U.S. regulations and has hired several former regulators to help with this effort.
However, the banks’ decision could make it more difficult for Binance to attract new customers and expand its user base in the United States. This could be a major problem for the exchange, as the United States is one of the largest cryptocurrency markets in the world and a key target for Binance’s growth strategy.
The banks’ decision could also have wider implications for the cryptocurrency industry as a whole. If other banks follow suit and restrict access to cryptocurrency exchanges, it could make it more difficult for people to buy and sell cryptocurrencies using traditional banking systems. This could lead to a shift towards alternative payment methods, such as stablecoins or peer-to-peer transactions.
In conclusion, the banks’ decision to restrict Binance’s access to the U.S. banking system is a significant blow to the exchange’s efforts to expand its operations in the United States. The move is based on concerns over Binance’s compliance with AML and KYC regulations and could make it more difficult for the exchange to attract new customers and expand its user base. The decision could also have wider implications for the cryptocurrency industry as a whole, as it could lead to a shift towards alternative payment methods and make it more difficult for people to buy and sell cryptocurrencies using traditional banking systems.