Feb 17, 2023
Binance Temporarily Halts U.S. Dollar Bank Transfers
Binance, the world’s largest cryptocurrency exchange by trading volume, has announced that it will temporarily halt US dollar transfers. The exchange made the announcement via a tweet on Feb 6, assuring that no other trading methods are affected. Binance CEO Changpeng Zhao stated that only 0.01% of the exchange’s users will be affected by the suspension, with the exchange working towards a resolution.
This follows the news from January 21st, when Binance’s SWIFT transfer partner, Signature Bank, declared that, as of February 1st, it would only accept trades from clients with US dollar bank accounts over $100,000. This came after the bank had previously restricted deposits from cryptocurrency consumers. At the time, Binance had stated that it was seeking an alternative SWIFT partner and that all other trading methods in other currencies and US dollars using credit or debit cards would continue to be accepted.
Signature Bank’s most recent action is part of its plan to reduce its exposure to the volatile crypto market, with the bank’s CEO Joe DePaolo declaring “We are not a cryptocurrency bank. We don’t want to be obligated to any particular sector or client.”
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, commented that “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.”
The current turmoil in the crypto market has made banks cautious about their involvement in digital assets, especially without uniform regulations governing the market. In many European countries, this has 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, comes into effect.
Tony Petrov, chief legal officer at compliance-as-a-service provider Sumsub, told Cointelegraph that the bear market has also played a part in banks’ decisions, saying “When the crypto market was skyrocketing, some banks were simply pushed into the open arms of crypto exchanges. But the time to scatter stones may be replaced by the time to gather them. And now some banks that were actively involved in crypto may rethink their involvement and change their policies.”
Saxo Bank founder Lars Seier Christensen believes the developments around FTX and other crypto disasters, combined with the low volumes in the market, have hurt confidence in the industry. He believes crypto businesses will need to “reinstate their reputation” with more stringent compliance infrastructure and third party risk management, in order to harmonize the approaches of crypto exchanges and banks and to return mutual trust.
Eddie Hui, chief operating officer at crypto exchange platform MetaComp, told Cointelegraph that banks are reducing their exposure to crypto and trying to diversify their client base in order to mitigate risk. He added that, while workarounds may exist, the end client will be paying the price of changes, as the more difficult access is, the fewer new clients and deposits will find their way onto exchanges.
The recent action of Binance’s USD banking partner has highlighted the need for uniform regulations in the crypto space, in order to build trust back. Until then, exchanges will have to mitigate the hurdles and risks on their own, with Binance looking to upgrade their service and find an alternative solution for SWIFT bank transfers.
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