Binance.US, the American branch of the global crypto exchange Binance, has recently put a stop to direct withdrawals of US dollars on its platform. This move is in response to the U.S. Securities and Exchange Commission (SEC) enforcement actions. Users on Binance.US have to convert their US dollars to stablecoins or other cryptocurrencies before making a withdrawal. As reported, Binance is also currently struggling in the UK with its efforts to be compliant with the FCA’s new crypto rules.
The exchange’s newly implemented terms, effective as of Monday, state that the FDIC no longer insures user funds in US dollars. “Users’ digital assets and account balances will not be protected by FDIC insurance,” noted the exchange. “For those wanting to withdraw in US dollars, conversion to stablecoins or other digital currencies is necessary before withdrawal.“
Binance.US’ Regulatory Tussles
Earlier in June, Binance.US had already put a hold on USD deposits, alerting its user base about potential disruptions in fiat withdrawal avenues. The exchange’s intention behind these actions was stated as a measure to shield both its users and its platform amidst escalating regulatory scrutiny.
This scenario emerges from an ongoing legal tussle involving Binance.US, the overarching Binance entity, and its founder, Changpeng Zhao (CZ). The SEC lodged a lawsuit on June 5, accusing them of running platforms for securities without proper registration.
In communication to its clientele, Binance.US pointed to the SEC’s “overly assertive and confrontational methods” as the reason behind the halt on dollar deposits. This regulatory strain made the exchange’s banking allies hesitant about continuing their association with the cryptocurrency domain. Moreover, there was a warning issued by Binance.US hinting at its bankers possibly stopping dollar withdrawals by June 13.
Regulatory Maze and Exchange Reactions
The US-based exchange, in June, also decided to suspend its Over-The-Counter (OTC) Trading Portal services. On top of this, Binance.US took the step of delisting ten cryptocurrency trading pairs linked with Bitcoin and Binance USD. A noteworthy observation was the sharp drop in value of several of these pairs after the SEC initiated its legal moves, resulting in a substantial decrease in available trading pairs on the exchange platform.
By September, the SEC took more aggressive measures in its case against Binance.US, requesting a Washington, DC court for a detailed inspection of the exchange’s handling of asset custody. The SEC’s move was driven by its allegations that Binance.US was not fully cooperative in furnishing the required documents.
