Feb 16, 2023
Binance Suspends USD Bank Transfers Amid Crypto Turmoil
The world’s leading crypto exchange, Binance, recently announced that it will be temporarily suspending U.S. dollar bank transfers. The exchange stated in a tweet that no other trading methods would be affected, and that they are looking to resolve the issue as soon as possible. CEO Changpeng Zhao noted that only 0.01% of the exchange’s total users will be affected.
The announcement comes after the exchange’s SWIFT transfer partner, Signature Bank, declared that, as of Feb. 1, it would only accept trades from clients with U.S. dollar bank accounts over $100,000. This follows Signature Bank’s plan to sell up to $10 billion in crypto deposits in December in an effort to reduce its exposure to the turbulent market changes.
In response to the news, a Binance spokesperson told Cointelegraph that, “We are actively working to find an alternative solution for SWIFT bank transfers. We have since paused all USD bank transfers as we work to upgrade the service. 0.01% of our average monthly users use U.S. bank transfers.”
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 that the seven-day outflows might be a little high, but the 24-hour inflows show it’s nowhere close to panic.
The current turmoil in the crypto market has made banks cautious, as they are hesitant to deal with digital assets without uniform regulations governing the nascent market. Banks want 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 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. He stated that “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. He added that, in order to mitigate this hurdle, crypto businesses will need to “reinstate their reputation” with more stringent compliance infrastructure.
Overall, the news of Binance’s USD banking partner has caused some concern in the crypto community. Until uniform regulations are in place, exchanges will have to mitigate the hurdles and risks on their own. This may include bundling withdrawals and going through scheduled withdrawals using a third-party payment company, but that may introduce additional costs, delays, operational burden and counterparty risk. To build trust back in the industry, experts believe embracing and welcoming clear regulations and adhering strictly to them, as well as helping to shape them with their knowledge, is the best thing the industry can do.
Disclaimer: All investment or financial opinions expressed by MoonLanding Media are not recommendations and are intended for entertainment purposes only. Do your own research prior to making any kind of investment. This article has been generated based on trending topics, has not been fact checked and may contain incorrect information. Please verify all information before relying on it.
