Feb 17, 2023

Binance Temporarily Suspends USD Bank Transfers

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Binance, the world’s leading crypto exchange by trading volume, recently announced in a tweet that they would temporarily suspend bank transfers in U.S. dollars. The exchange stated that no other trading methods would be affected and CEO Changpeng Zhao noted that only 0.01% of the exchange’s total users will be affected.

This announcement comes after Binance encountered related financial issues in the U.S. On January 21, its SWIFT transfer partner, Signature Bank, announced that, as of February 1, it would only accept trades from clients with U.S. dollar bank accounts over $100,000. This was a drastic move from the bank, who 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.

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 the seven-day outflows might be a little high, but the 24-hour inflows show it’s nowhere close to panic.

The turmoil in the crypto market has made banks very cautious. Banks are hesitant to deal with digital assets, especially 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 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 reducing exposure to crypto and trying to diversify the client base would mitigate risk. He added that, in the case of Silvergate, the restriction they imposed was on transactions below $100,000. He further commented 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 has caused a stir in the crypto community, especially after a disastrous 2022 that saw many crypto goliaths fall from the top. Regulatory bodies have said that crypto will be their priority, but 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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