The largest cryptocurrency exchange in the world, Binance, said on Monday that it would stop accepting deposits and withdrawals in US dollars. The business gave no explanation for the move.
The company’s subsidiary Binance US, which is subject to regulation by the Financial Crimes Enforcement Network of the Treasury Department, stated in a tweet that it is unaffected by the ban. Therefore, the change only affects foreign clients who transfer money to or from bank accounts in US dollars.
Withdrawals From Binance’s Crypto Wallets Are Up!
Following the announcement, there was a substantial increase in withdrawals from Binance’s crypto wallets, according to data from Arkham Intelligence, as millions of dollar-pegged stablecoins like tether and USDC migrated to other exchanges or private wallets.
According to DefiLlama data, Binance lost almost $172 million worth of US dollars over the day. For a business that has crypto assets valued at $42.2 billion, that is a very small sum of money.
Binance said in late January that US banking partner Signature Bank had raised the threshold for dollar transactions to $100,000. Binance claimed at the time that Signature had informed the exchange that the increased requirement extended to all users of cryptocurrency exchanges.
A Binance spokesman wrote to CNBC in response to the suspension on Monday, stating that “Binance.US has its own banking partners and does not have any concerns.” US users are not supported by the main Binance exchange.
Binance Is No Longer Accepting Dollars
Furthermore, the first cryptocurrency exchange in the world no longer accepts dollar transactions to purchase cryptocurrencies like Bitcoin.
The market momentum is positive, at least so far, and some people are already anticipating a repetition of 2019.
The choice made by Binance is not terribly surprising. To reduce the dangers related to the fact that the anonymity prevalent in the cryptocurrency business encourages money laundering and other illegal operations, traditional banks are frequently unwilling to partner with crypto enterprises.
Traditional banks must significantly enlarge their risk-oversight teams by forming relationships with crypto companies. Most crypto companies are not publicly traded, therefore they are not required to be transparent about their operations, thus many financial institutions would just want to avoid this additional hassle.
Following the FTX fiasco, regulators also reminded banks of the dangers of conducting business in the cryptocurrency industry.
Binance had previously stated in January that its banking partner, Signature Bank, has consented to process investor transactions but only for transactions involving amounts greater than $100,000. The financial institution’s choice was an effort to lessen its exposure to digital assets.