Binance Holdings, a leading cryptocurrency company, is thinking about terminating its contracts with American business partners as regulators step up their scrutiny.
According to a person familiar with the matter, the business, which runs the biggest cryptocurrency exchange in the world, is considering retreating after its connections with a significant banking partner and stablecoin issuer ran into difficulty under intensive scrutiny from authorities. The Securities and Exchange Commission, Commodities Futures Trading Commission, Justice Department, and Internal Tax Service are all looking into Binance.
The individual, who asked to not be identified because they were revealing private information, said that Binance is considering whether to sever relationships with intermediary companies including banks and services providers and is reevaluating venture capital investments in the U.S. With Circle’s stablecoin USD coin, it will think about delisting tokens from any American-based projects, the source claimed.
To service cryptocurrency users in the United States, Binance lacks authorization. There is Binance.US in its place, a much smaller exchange that asserts its independence and stated it has no plans to exit the United States.
Changpeng Zhao, the CEO of Binance, hinted last week at a probable retreat. Following Paxos Trust Co.’s announcement that it would discontinue creating Binance-branded stablecoin, Zhao stated on Twitter that With the current regulatory uncertainty in certain markets, they will be assessing other initiatives in certain jurisdictions to ensure their customers are protected from any undue harm.
Zhao tweeted on Friday that Binance has temporarily “drawn back on some possible investments, or bids on bankrupt businesses in the US.” He claimed it was “wrong” that Binance would delist all tokens with U.S. origins.
Binance won’t be the first or the last digital asset company to remove itself from the market in the wake of regulators’ crackdown following the collapse of crypto exchange FTX if it starts limiting or severing its links with American companies. After receiving cease-and-desist orders from numerous states, Nexo Inc. declared in December that it will gradually stop offering its goods and services on the American market. As US authorities vigorously control a sector whose unfettered growth could eventually shake the established financial system, more departures are anticipated.
A spokeswoman for Binance said, Like every other blockchain startup, they are performing a comprehensive cost-benefit analysis and will pivot its business as necessary to preserve its worldwide user base.
Binance had a successful year in 2022 and established a reputation as an exchange that had weathered the crypto winter relatively intact. Binance consolidated its market dominance when FTX flopped. As per data, it made up 55% of all spot cryptocurrency trading in the world in January.
The crackdown has taken a toll over the past week. According to data estimates from blockchain analytics company Nansen, the international exchange saw a net outflow of $1.9 billion in assets. The crackdown on Paxos’s Binance stablecoin BUSD has caused $2.3 billion in token redemptions between February 13 and Thursday.
Recent moves by American regulators, including as stepped-up warnings to banks about cryptocurrency ties, are isolating Binance and other participants more and more.
Binance stopped allowing customers to make deposits and withdrawals in dollars using bank accounts earlier this month after Signature Bank withdrew.
According to Reuters, who cited company correspondence and banking records, Binance transferred more than $400 million in the first quarter of 2021 from a bank account of Binance.US, which is purported to be a separate exchange created for the U.S. market, to a trading company run by Zhao.
In a statement sent to Twitter on Thursday, Binance.US addressed the issue, stating that “although a market-making company by the name of Merit Peak operated on the Binance.US platform, it halted all operations on the platform in 2021.” According to the statement, Binance.US has never traded or lent out customer money.
The New York state Department of Financial Services ordered Paxos Trust, Binance’s stablecoin issuance partner, to stop creating new Binance USD stablecoins on February 13.
The SEC also sent a notice to Paxos indicating that it was considering proposing an action on the grounds that Binance USD is an unregistered securities.
According to Chief Strategy Officer Patrick Hillmann in an interview on Wednesday, Binance had prior weaknesses in its regulatory compliance that have since been filled. It’s in settlement talks with US regulators, but Hillmann said he can’t give an ETA or potential settlement sums.
The U.S. crackdown may cause more cryptocurrency projects to move elsewhere.
According to J. Austin Campbell, adjunct professor at Columbia Business School, when you choke off access in the U.S. financial system, you will see two effects — in aggregate there will be less dollars going into the system, but it’s also important to remember that there are other places as well to move money, so this act would be empowering other providers.
