The United States arm of global crypto exchange Binance has faced challenges establishing a new banking partner to serve as a fiat on-ramp and off-ramp for its clients in the country. according to a Wall Street Journal report on April 8.
The recent failures of Silvergate and Signature Bank left Binance.US without banking services, relying on intermediary banks to store funds on its behalf, according to the WSJ, citing “people familiar with the matter.”
Regulatory crackdown on banks with crypto clients is also another factor contributing to the difficulties of the exchange. In March, the US Commodity Futures Trading Commission (CFTC) sued Binance Holdings and its CEO, Changpeng “CZ” Zhao, for alleged trading violations. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021.
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Binance.US needs a bank to directly hold its customers’ US dollars, but recent attempts to establish direct banking relationships with banks, such as Cross River Bank and Customers Bancorp, have failed.
Binance.US clients have been affected by the lack of a direct bank. In a recent status update, the exchange saying that it “was transitioning to new banking and payment service providers over the next few weeks,” adding that some dollar deposit services would be temporarily affected during the transition.
Binance.US currently holds client funds through fintech firm Prime Trust. A Prime Trust spokesperson stated that all funds received from clients are stored through its banking partners.
“We work with multiple US-based banking and payment providers and continue to add new partners while updating our internal systems to create a more stable fiat platform and offer additional services,” a Binance.US spokesperson told the WSJ.
Binance.US is operating in an environment similar to what crypto businesses are experiencing in the UK, where banks are stopping accepting clients from the crypto sector. The few banks that still work with crypto businesses in the UK are asking for more documentation and information on how they monitor customer transactions.
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