Just days after being sued by the Securities and Exchange Commission, the US arm of giant cryptocurrency exchange Binance, announced Some painful news: it will no longer allow customers to trade using US dollars on its platform.
The company said that banking partners of the US unit of the exchange, Binance.US, were fearful of SEC action, and were shutting down the critical payment rail that allows dollars to move in and out of the platform.
This week, the SEC filed back-to-back lawsuits against Binance and US exchange Coinbase, two of the world’s largest crypto companies. The SEC said that Binance had lied to regulators and improperly handled customer funds; Coinbase was accused of operating as an unlicensed securities exchange.
The effect of the suit was immediate. Trading App Robinhood Launching June 27 SaidIt will no longer support transactions in three popular cryptocurrencies — Solana, Cardano and Polygon — which the SEC classified as unregistered securities in its court filing.
The changes to Binance.US will go into full effect on Tuesday. Here’s what the announcement means for customers.
a break in a significant type of business
One of the main roles of a crypto exchange is to act as a portal: a customer can log on, and convert dollars into cryptocurrencies such as bitcoin or ether.
Binance.US will no longer offer that service, at least for the time being, according to its announcement. In a message to customers, the company said it was “taking the necessary action as we are transitioning to a crypto-only exchange.”
This means trading enthusiasts will still be able to use their crypto to buy other digital currencies – spending their bitcoin on ether, for example. But buying or selling crypto with US dollars will be prohibited.
A crypto exchange is not just a marketplace. Clients also keep their holdings on the platform, storing both traditional and digital currencies.
In its statement, Binance.US said it was suspending US dollar deposits and urged users to withdraw any dollars held on the exchange by Tuesday.
crypto trading still active
According to a Binance.US statement, any dollars remaining on the platform can be converted into a stablecoin, a type of cryptocurrency designed to maintain a constant price of $1.
And the company tried to reassure its customers that their crypto holdings were safe. “To be clear, we maintain a 1:1 reserve for all client assets,” the message said. “Customer funds are always safe, secure and available.”
Can other exchanges impose similar limits?
This will most likely depend on the reactions of US banks that work with other crypto companies. It is noteworthy that Coinbase, which was also sued this week, has not made a similar announcement.
The case for Coinbase and Binance is very different. The SEC has accused Binance of misappropriating customer funds and funneling billions of dollars to a trading firm owned by the company’s chief executive, Changpeng Zhao.
That allegation has echoes of the FTX exchange implosion, which cost customers billions of dollars. Prosecutors claim that FTX’s chief executive, Sam Bankman-Fried, misappropriated client funds, diverting the money to a trading firm and spending it on political donations and real estate.
The SEC’s Coinbase suit is much narrower. The agency is alleging that Coinbase is offering cryptocurrencies that meet the legal definition of a security, like a stock or bond traded on Wall Street, and should be regulated as such.