Binance.US, the United States arm of the global crypto exchange, has been experiencing difficulties in establishing a new bank partner to serve as a fiat on-ramp and off-ramp for its clients in the country. The exchange has been relying on middleman banks to store funds on its behalf, after the recent failures of Silvergate and Signature Bank left it without banking services.
According to a Wall Street Journal report on April 8, Binance.US needs a bank to directly hold its clients’ U.S. dollars. However, recent attempts to establish direct banking relationships with banks such as Cross River Bank and Customers Bancorp have failed. The regulatory crackdown on banks with crypto clients is another factor contributing to the exchange’s struggles. In March, the U.S. Commodity Futures Trading Commission (CFTC) sued Binance Holdings and its CEO, Changpeng “CZ” Zhao, for alleged trading violations. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021.
Binance.US customers have been affected by the absence of a direct bank. In a recent status update, the exchange stated that it “was transitioning to new banking and payment service providers over the next several weeks,” adding that some U.S. dollar deposit services would be temporarily impacted during the transition. Currently, Binance.US is holding customer funds via the financial technology firm Prime Trust, and a spokesperson for Prime Trust stated that all funds received from clients are stored through its banking partners.
In response to the challenges it is facing, a spokesman for Binance.US stated that the exchange is working with multiple U.S.-based banking and payment providers and continues to onboard new partners while upgrading its internal systems to create a more stable fiat platform and offer additional services.
Binance.US is not the only crypto firm experiencing banking challenges. In the United Kingdom, banks are moving away from accepting clients from the crypto sector, and the few banks still working with crypto firms are requesting more documentation and information about how they monitor clients’ transactions.
The challenges faced by Binance.US and other crypto firms in establishing banking relationships with traditional financial institutions highlights the need for greater regulatory clarity and guidance in the crypto industry. As the industry continues to grow and mature, it is essential for regulators and financial institutions to work together to establish clear guidelines and standards that can help foster a more stable and secure financial ecosystem.