Update 1130am ET: the digital ink is not yet dry on the Bloomberg report and already CZ is denying the report:
BINANCE CEO SAYS REPORT ABOUT CO CONSIDERING DELISTING ALL U.S.-BASED CRYPTOCURRENCIES IS “FALSE”
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The world’s largest crypto exchange, Binance, is considering ending all relationships with US business partners amid an unprecedented crackdown by the Biden administration against everything crypto-related following the abysmal failure of regulators to prevent prominent Democratic donor Sam Bankman-Fried from stealing billions in client funds.
According to Bloomberg, the company is weighing the retreat after its relationships with a key banking partner and stablecoin issuer ran into trouble amid intense scrutiny from authorities, according to a person familiar with the issue. In recent weeks, Binance has also been probed by the Securities and Exchange Commission, Commodity Futures Trading Commission, Justice Department and the Internal Revenue Service, all in hopes of distracting from the Democrats’ abysmal failure with SBF.
Binance is reportedly looking at whether to sever ties with intermediary firms such as banks and services firms and is reassessing venture-capital investments in the US. Among other actions, it will consider de-listing tokens from any US-based projects, including Circle’s stablecoin USD Coin, the person said. While Binance Holdings isn’t authorized to serve crypto customers in the US, instead it uses Binance.US, a far smaller exchange that claims to be independent and said it has no plans to leave the US.
Binance Chief Executive Officer Changpeng Zhao, aka CZ, signaled the potential retreat earlier this week. “Given the ongoing regulatory uncertainty in certain markets, we will be reviewing other projects in those jurisdictions to ensure our users are insulated from any undue harm,” Zhao said Monday on Twitter after Paxos Trust announced it would stop issuing Binance-branded stablecoin.
As Bloomberg notes, if Binance begins limiting or ending its ties with US firms, it won’t be the first, or last, digital-asset firm to distance itself from the US market amid regulators’ crackdown following crypto exchange FTX’s collapse. Nexo Inc. in December announced plans to phase out its products and services in the US market after cease-and-desist orders from multiple states. More departures are likely as US officials aggressively rein in an industry whose unchecked growth could eventually rattle the traditional financial system.
“Like every other blockchain company, we are conducting a careful cost-benefit analysis and will pivot our business as necessary to protect our global user base,” a spokesperson for Binance said.
And so, to deflect the humiliation from enabling Democratic donor SBF, the Biden admin and SEC chair Gary Gensler are willing to thoroughly gut the US crypto market and hand the future of crypto development on a silver platter to such jurisdictions as Dubai and Singapore, both of which have been far more welcoming of the technology, even as the US has cracked down. Furthermore, by launching war against bitcoin and crypto, Biden is effectively alienating millions of young crypto fans whose net worth is closely tied to the US regulatory crackdown on crypto. In doing so, the president is also making crypto a major issue for tens of millions of young Americans, in the next election.
Going back to Binance, the exchange ended 2022 on a high note,, positioning itself as an exchange that had been relatively unscathed by the crypto winter. After FTX failed, Binance solidified its dominance in the market. In January, it accounted for 55% of world spot trading in crypto, according to CryptoCompare data.
In the past week, the clampdown has taken its toll. The international exchange experienced a net outflow of $1.9 billion in assets, according to data estimates from Nansen. The crackdown on Binance stablecoin BUSD, issued by Paxos, sparked $2.3 billion in redemptions of the tokens from Monday to Thursday.
US regulators’ recent actions, including stepped-up warnings to banks about crypto ties, are increasingly isolating Binance and other players.Earlier this month, Binance suspended deposits and withdrawals of US dollars using bank accounts for clients after Signature Bank pulled back, Bloomberg previously reported.
Citing company messages and banking records, Reuters reported Thursday that Binance moved more than $400 million in the first quarter of 2021 from a bank account of Binance.US at Silvergate, which is supposedly a separate exchange designed for the US market, to a trading firm managed by Zhao.
Binance.US responded with a statement on Twitter Thursday, saying that “while there was a market making firm named Merit Peak that operated on the Binance.US platform, it stopped all activity on the platform in 2021.” It said that Binance.US has never traded or lent out customer funds.
While Binance had earlier gaps in its regulatory compliance, those have since been closed, Chief Strategy Officer Patrick Hillmann said in an interview on Wednesday. It’s in settlement discussions with US regulators, but Hillmann said he can’t provide a timeline or potential settlement amounts.
“When you choke off access in the US financial system, you will see two effects — in aggregate there’s less dollars going into the system, but it’s also important to remember US is not the only place to move money, so you will be empowering offshore providers,” said J. Austin Campbell, adjunct professor of Columbia Business School.
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