Feb 17, 2023
Binance Suspends USD Bank Transfers, Citing Financial Issues
The world’s leading crypto exchange, Binance, recently announced that it will be temporarily suspending bank transfers in U.S. dollars, though it has not provided an explanation for the decision. 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.
The suspension 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 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.
Data from Nansen reveals 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, commented that the seven-day outflows might be a little high, but the 24-hour inflows show it’s nowhere close to panic.
Turmoil in the crypto market makes banks cautious
The current bear market and lack of uniform regulations governing the nascent crypto market have made banks hesitant to deal with digital assets. In many countries in the European Union, this has even resulted in 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, explained that some banks that were actively involved in crypto may now rethink their involvement and change 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, commented 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.
The recent action of Binance’s USD banking partner has raised many eyebrows in the crypto community, and 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.
For crypto businesses, this means that they must make an effort to “reinstate their reputation, and for that, they will need more stringent compliance infrastructure. Ideally, some third parties guarantee the required levels of risk management, to harmonize the approaches of crypto exchanges and banks and to return mutual trust on both sides of global finance.”
For crypto exchanges, this means that they must look for alternative solutions for SWIFT bank transfers, and they must also look into bundling withdrawals and going “through scheduled withdrawals using a third-party payment company.” This may introduce additional costs, delays, operational burden and counterparty risk, but it may also be the only way to ensure that they can continue to provide their services.
The crypto industry must embrace and welcome clear regulations, as well as help shape them with their knowledge, in order to build trust back. Crypto exchanges must also look for ways to mitigate the hurdles and risks associated with their services, in order to ensure that their clients can continue to access and use their services.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.