Starting June 13, Binance US customers will lose the ability to use US dollars for purchasing crypto, hindering the exchange’s operations in the United States. The exchange announced this change on Twitter, attributing it to the Securities and Exchange Commission’s unjustified civil claims against their business.
Binance took preemptive action by disabling customers’ ability to buy and deposit US dollars.
The SEC has focused its scrutiny on Binance’s banking transactions. This led to a civil complaint against the exchange and its founder, Changpeng Zhao. The complaint alleges violations of US securities laws, as Zhao’s influence and ownership of Binance US and international arms involve offshore holding companies that have reportedly transferred billions of dollars in assets among themselves.
In response, the SEC filed an emergency motion for a temporary restraining order that would have frozen US dollars from the exchange.
The customers will not lose their money. Those who fail to withdraw funds before the shutdown date can still convert them to stablecoins like Tether. These can be withdrawn elsewhere to convert them back to dollars. However, this development indicates that Binance’s banking partners consider the exchange too risky to continue working with, given the significant revelations from the SEC case.
According to SEC documents, banking partners of Binance US include Axos Bank and Cross River Bank. It also includes the now-defunct Silvergate, Signature, and Silicon Valley Banks. They processed billions of dollars in transactions for Binance US.
Some banking partners had already ceased their services to Binance. However, it remains unclear which banking partners the exchange has managed to retain.
On Friday, BNB, the native crypto token of Binance, experienced a decline of approximately 2.5% as of 10:45 a.m. in Singapore. This adds to its recent period of underperformance in comparison to the broader digital asset markets.
US regulators sued Binance and founder Changpeng Zhao for mishandling investor funds and violating US securities laws. The charges include operating as an unregistered exchange. It also includes engaging in practices similar to those exposed after the collapse of FTX. This news rapidly dropped Bitcoin’s value, causing it to lose nearly 2% within minutes.
The lawsuit filed by the US SEC alleges that Binance and Changpeng Zhao misused investor funds and failed to comply with US securities regulations. Consequently, Bitcoin, which holds a market value of over $500 billion, experienced a significant decrease in value.
The charges are reminiscent of the practices that came to light following the downfall of FTX. It highlights the ongoing concerns in the cryptocurrency industry.
Binance, established as a Cayman Islands limited liability company by Changpeng Zhao, now faces legal scrutiny regarding its operations. The allegations outlined in the lawsuit suggest that Binance and its founder engaged in activities that violated US securities laws. It failed to register as an exchange.
This development adds to the growing regulatory challenges faced by cryptocurrency exchanges and their role in ensuring compliance and investor protection.
FTX collapse effect
FTX, accused of co-mingling funds and making undisclosed high-risk investments, collapsed eight months ago. In December, US prosecutors charged FTX’s founder, Sam Bankman-Fried, with money laundering, fraud, and securities fraud.
The SEC’s new complaint against Binance echoes long-standing claims made by the Bitcoin and crypto communities against Changpeng Zhao and his companies, according to Swan Bitcoin CEO Cory Klippsten.