Feb 17, 2023

Binance Suspends USD Bank Transfers Amid Crypto Market Turmoil

Binance, the world’s leading crypto exchange by trading volume, has announced that it will temporarily suspend bank transfers in U.S. dollars. The exchange stated in a tweet on Feb. 6 that no other trading methods would be affected. The announcement came with no explanation. However, Binance CEO Changpeng Zhao noted in a tweet that only 0.01% of the exchange’s total users will be affected by the suspension while assuring that they are looking to resolve the issue soon.

This news comes after Binance encountered related financial issues 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. The bank had previously declared that it was severely restricting deposits from cryptocurrency consumers.

At the time, Binance stated that it was looking 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 decision came 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, told Cointelegraph, “Jump and Oapital are large players who routinely sling around large sums, however, and it’s difficult to fully attribute the movements to the banking announcement. I’d say the seven-day outflows might be a little high, but the 24-hour inflows show it’s nowhere close to panic.”

Turmoil in crypto market makes banks cautious

The crypto market has been in a state of flux, and this has caused banks to become increasingly cautious. Banks are generally 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.

For banks, the most important thing is to remain part of the financial system, and if they feel that they could be cut off because they took too much risk, they will simply not take it to begin with. Tony Petrov, chief legal officer at compliance-as-a-service provider Sumsub, told Cointelegraph that the ongoing bear market is another reason behind the bank’s recent action, stating, “When the crypto market was skyrocketing, some banks were simply pushed into the open arms of crypto exchanges: They had no bad reputation, their open faces inspired confidence, and the concern that most of the banks had little or no understanding of crypto industry could not beat the unprecedented figures of profits that one could make in crypto.”

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. Reducing exposure to crypto and trying to diversify the client base would mitigate such risk.

He added that, in the case of Silvergate, the restriction they imposed was on transactions below $100,000. Some exchanges may decide to bundle withdrawals and to go “through scheduled withdrawals using a third-party payment company, but that may introduce additional costs, delays, operational burden and counterparty risk.”

Hui further commented: “The bottom line is that workarounds may exist, but it is unfortunate to see the gap between crypto and banks widen again, as the end client will be paying the price of those changes.”

The recent action of Binance’s USD banking partner raised many eyebrows in the crypto community, especially after a disastrous 2022 that saw many crypto goliaths fall from the top, confidence in the crypto ecosystem taking a hit. 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.

NFTs have become increasingly popular in the crypto space, and many exchanges are now offering NFTs as a way to promote their services. Binance, for example, has launched an NFT marketplace, allowing users to buy and sell digital collectibles. The exchange has also partnered with Twitter to offer NFT promotions and marketing campaigns.

NFT marketing agencies have sprung up to help crypto exchanges, projects, and companies with their NFT promotions and marketing. These agencies specialize in creating engaging campaigns that can help promote NFTs and generate more sales. They also provide services such as market research, content creation, and analytics.

The crypto industry is growing rapidly, and with it, the need for NFT promotion and marketing. As more projects and companies look to sell NFTs, the demand for NFT marketing agencies will only increase. With the right strategy and services, these agencies can help projects and companies reach their goals and succeed in the web3 space.

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