Feb 17, 2023
Binance Suspends USD Bank Transfers Amid Crypto Market Turmoil
Binance, the world’s leading crypto exchange by trading volume, recently announced that it will temporarily suspend bank transfers in U.S. dollars. This announcement came with no explanation, though CEO Changpeng Zhao noted in a tweet that only 0.01% of the exchange’s total users will be affected. The exchange is looking to resolve the issue soon.
The suspension is related to financial issues Binance encountered in the U.S. On Jan. 21, its SWIFT transfer partner, Signature Bank, announced that, as of Feb. 1, it would only accept trades from clients with U.S. dollar bank accounts over $100,000. This is a significant decrease from the bank’s previous policy, which declared that it was severely restricting deposits from cryptocurrency consumers.
At the time, Binance stated that it was searching for a new SWIFT partner and that all SWIFT trades involving other currencies, as well as trading in U.S. dollars using credit or debit cards, will continue to be accepted.
Signature Bank’s most recent action comes after it disclosed plans to sell up to $10 billion in crypto deposits in December in an effort to reduce its exposure to the turbulent market changes.
Nansen data shared with Cointelegraph shows that notable stablecoin movements include crypto trading group Jump withdrawing $160 million in stablecoins and Oapital, a digital asset investment firm, withdrawing $230 million. Andrew Thurman, head of content at Nansen, believes that the seven-day outflows might be a little high, but the 24-hour inflows show it’s nowhere close to panic.
Banks are usually hesitant to deal with digital assets, especially without uniform regulations governing the nascent market. In many countries in the European Union, this turned into a total ban on a national regulatory level until the Markets in Crypto-Assets package, a pan-European regulatory set for digital assets, enters into force.
Tony Petrov, chief legal officer at compliance-as-a-service provider Sumsub, believes that the ongoing bear market is another reason behind the bank’s recent action. He said that when the crypto market was skyrocketing, some banks were pushed into the open arms of crypto exchanges, but now that the market has cooled off, they are rethinking their involvement and changing their policies.
Lars Seier Christensen, the founder of Saxo Bank, believes the developments around FTX and other crypto disasters, combined with the low volumes in the market, have hurt confidence in the industry. Banks believe the benefits associated with crypto trading activity are not proportional to the increasing regulatory and business risks.
Eddie Hui, chief operating officer at crypto exchange platform MetaComp, told Cointelegraph that it is not uncommon to see an increase in bank runs on exchanges where clients try to withdraw their cash at the same time. He added that crypto businesses will make an effort to “reinstate their reputation, and for that, they will need more stringent compliance infrastructure.”
The recent action of Binance’s USD banking partner raised many eyebrows in the crypto community. While regulatory bodies have said that crypto will be their priority, experts believe uniform regulations are a must to build that trust back. Until then, exchanges will have to mitigate the hurdles and risks on their own.
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