According to the Wall Street Journal, the recent Silvergate and Signature Banks collapses had left Binance.US without banking services, relying on intermediary banks to store funds on its behalf.
In the case of Signature, it was intervened by New York state authorities to “protect depositors,” according to the Department of Financial Services (DFS). While Silvergate was voluntarily liquidated in accordance with applicable regulatory processes, facts reported by CryptoNews.
This scenario has left Binance and other cryptocurrency companies without banking partners in the United States, so they have had to turn to other intermediaries that slow down the processes.
Binance’s problem has affected the process of sending and moving its users’ funds, since users’ dollar deposits were sent to Signature Bank or Silvergate Capital, both of which were declared bankrupt last March, according to a Wall Street Journal source.
At the moment, Binance.US holds customer funds through the financial technology company Prime Trust. A Prime Trust spokesperson indicated that all funds received from customers are deposited through its banking partners.
Binance Has Sought to Partner with other Banks in the US but It Has Been Rebuffed
The search of finding a bank to help Binance’s streamline processes and transactions has been unsuccessful. The company has knocked on various banks’ doors such as Cross River Bank and Customers Bancor that provide services to some cryptocurrency companies, but there has been no positive answer to its request.
One of the major difficulties that this cryptocurrency exchange with the largest trading volume globally, is to find a bank to directly hold its customers’ dollars, as this is a must that should be accomplished sooner.
A Binance.US representative had said that “We work with multiple U.S.-based payment and banking providers and continue to bring on new partners as we upgrade our internal systems to create a more stable fiduciary platform and offer additional services.”
Binance.US is operating in an environment similar to what cryptocurrency companies are experiencing in the UK, where banks are moving away from accepting customers from the cryptocurrency sector.
Binance Faces Legal Problems in the U.S.
The regulatory crackdown on banks with cryptocurrency customers is also another factor contributing to the exchange’s difficulties.
The U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit on March 28 against Binance along with its CEO, Changpeng Zhao, and former chief compliance officer Samuel Lim.
The lawsuit alleges that Binance violated U.S. derivatives law by offering its derivatives trading services to U.S. customers without registering with the appropriate market regulators. The CFTC accused Binance of prioritizing commercial success over regulatory compliance.
The U.S. regulator has also charged Binance and its CEO with seven violations of the Securities Exchange Act and controlled foreign company rules.
Changpeng “CZ” Zhao Binance Holdings has been sued for allegedly violating several regulations, among those, he is accused of manipulating the market for his convenience. This cryptocurrency exchange has been under investigation by the CFTC since 2021.
On the other hand, Binance exchange CEO and founder, Changpeng Zhao (CZ), rejected the allegations and said that the company cooperates with regulators and law enforcement, so the complaint was “unexpected and disappointing” to him.
By Marina Meza
