Binance.US finding a new bank partner in the US is difficult, leaving the exchange without direct banking services and depending on intermediary institutions to hold funds.
- Finding a new bank partner to act as a fiat on-ramp and off-ramp for its clients in the country has been difficult for Binance.US, the US-based branch of the global cryptocurrency exchange.
- The lack of direct banking partners in Binance.US may result in longer processing times, more fees, and fewer incentives for clients to use the company’s services.
Background
Finding a new bank partner to act as a fiat on-ramp and off-ramp for its clients in the nation has been difficult for Binance.US, the US-based branch of the global cryptocurrency exchange. The exchange has reportedly needed help forging direct banking partnerships with institutions, including Cross River Bank and Consumers Bancorp, leading to their need for a new banking partner, according to a Wall Street Journal (WSJ) article from April 8, 2023. Nevertheless, due to the recent failures of banks like Silvergate and Signature Bank, Binance.US is now without banking services and must rely on intermediary institutions to store its cash.
Regulatory Crackdown on Banks with Crypto Clients
Another element affecting the exchange’s difficulties is the regulatory crackdown on banks with cryptocurrency clients. Binance Holdings and its CEO, Changpeng “CZ” Zhao, sued the US Commodities Futures Trading Commission (CFTC) in March 2023 for suspected trading breaches. Since 2021, the CFTC has been looking into the cryptocurrency exchange. As a result, Binance is shrouded in mystery. It’s possible that Binance.US’s regulatory compliance contributed to its failure to locate a direct banking partner.
Impact on Binance.US Customers
The lack of a direct bank has an impact on Binance.US clients. The exchange recently updated its status, stating that it “was transitioning to new banking and payment service providers over the next several weeks” and that the transition would temporarily affect some US dollar deposit services. Customers may choose to use other exchangers if the exchange cannot offer low costs and quick withdrawals due to a lack of direct banking ties.
Current Holding of Customer Funds
With the financial technology company Prime Trust, Binance.US is now keeping customer assets. According to a Prime Trust representative, all client funds are supported by the company’s banking partners. “We work with many US-based banking and payment providers and continue to onboard new partners while updating our internal infrastructure to build a more solid fiat platform and offer additional services,” a spokeswoman for Binance.US said in an interview with the Wall Street Journal.
Comparison with the UK Cryptocurrency Industry
The operating environment for cryptocurrency businesses in Binance.US is comparable to those in the United Kingdom, where banks are shunning clients from the crypto sector. A few UK banks still collaborating with cryptocurrency companies are asking for additional proof and details regarding their monitoring system for customer transactions. This pattern emphasizes how difficult it is for crypto companies to engage with reputable banks and provide their consumers with fiat on-ramp and off-ramp services.
Conclusion
Because Binance.US could not locate direct banking partners in the United States, it was forced to rely on intermediary banks to keep customer funds. Because of this reliance on other banks, clients may experience longer processing delays, higher fees, and fewer incentives to use Binance.US’s services. Furthermore, it has been difficult for Binance.US to locate a new banking partner due to the regulatory crackdown on institutions with cryptocurrency clients. Regulatory agencies must establish clear standards that encourage banks to collaborate with cryptocurrency exchanges to prevent the cryptocurrency industry’s growth from being hampered.
