US Market: Binance Considers Pulling Out of US Partners as Crypto Crackdown Intensifies

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Crypto giant Binance Holdings Ltd. plans to end its relationship with its U.S. business partners as regulators ramp up the pressure.

The company, which operates the world’s largest crypto exchange, is weighing retirement after its dealings with a key banking partner and stablecoin issuer ran into trouble amid scrutiny from authorities, according to someone familiar with the issue. Binance has been questioned by the Securities and Exchange Commission, Commodity Futures Trading Commission, Department of Justice, and Internal Revenue Service.

Binance Holdings is considering severing ties with intermediary companies such as banks and service companies and reassessing venture capital investments in the United States, according to the person, who asked not to be identified while discussing details that had not yet been made public. It will consider removing tokens from all US-based projects, including Circles stablecoin USD Coin, the person said.

Binance Holdings is not authorized to serve crypto clients in the United States. Instead, there’s Binance.US, a much smaller exchange that claims to be independent and has said it has no plans to leave the United States.

Binance Managing Director Changpeng Zhao, known as CZ, flagged the potential pullout earlier this week. Given the current regulatory uncertainty in some markets, we will review other projects in those jurisdictions to ensure our users are safe from undue hardship, Zhao said on Twitter Monday after Paxos Trust Co. announced that it would stop issuing Binance-branded stablecoins.

On Friday, Zhao tweeted that Binance had withdrawn some potential investments or bids on bankrupt companies in the US for the time being. He said it was wrong that Binance would remove all US-based tokens.

If it begins to limit or end its ties with US companies, Binance Holdings will not be the first or the last digital asset company to distance itself from the market amid a crackdown from regulators after the collapse of the markets. Crypto exchange FTX. Nexo Inc. announced plans in December to phase out its products and services from the U.S. market after cease-and-desist orders from several states. More departures are likely as U.S. officials aggressively rein in an industry whose runaway growth could eventually rattle the mainstream financial system. base, a Binance spokesperson said.

Binance ended 2022 on the upside, positioning itself as an exchange that had been relatively untouched by the crypto winter. After the failure of FTX, Binance consolidated its dominance in the market. In January, it accounted for 55% of global crypto spot trade, according to data from CryptoCompare.

Last week, the repression took its toll. The international exchange saw a net outflow of $1.9 billion in assets, according to Nansen data estimates. The crackdown on the Binance BUSD stablecoin, issued by Paxos, triggered $2.3 billion in token buybacks Monday through Thursday.

Recent actions by US regulators, including intensified warnings to banks about crypto links, are increasingly isolating Binance and other players.

Earlier this month, Binance suspended US dollar deposits and withdrawals using bank accounts for customers after Signature Bank pulled out, Bloomberg previously reported.

Citing corporate messages and bank records, Reuters reported on Thursday that Binance transferred more than $400 million in the first quarter of 2021 from a bank account at Binance.US, which is supposed to be a separate exchange designed for the market. American, to a commercial company managed by Zhao.

Binance.US responded Thursday with a statement on Twitter, saying that even though there was a market making company named Merit Peak that operated on the Binance.US platform, it stopped all activity on the platform in 2021. She said Binance.US has never traded or loaned customer funds.

Binance StablecoinOn Feb. 13, Paxos Trust Co., Binances’ partner for stablecoin issuance, said it was ordered by the New York State Department of Financial Services to stop issuing new Binance USD stablecoins.

Paxos also received a notice from the SEC that the agency is considering recommending action alleging that Binance USD is an unregistered security.

Binance had prior gaps in its regulatory compliance that have since been addressed, Chief Strategy Officer Patrick Hillmann said in an interview on Wednesday. These are settlement discussions with U.S. regulators, but Hillmann said he could not provide a timeline or potential settlement amounts.

US crackdown could move more crypto projects overseas.

When you stifle access to the US financial system you will see two effects overall there are fewer dollars entering the system but it is also important to remember that the US is not alone place to move money, so you’ll be giving more power to offshore suppliers, said J. Austin Campbell, assistant professor at Columbia Business School.

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