The United States arm of global crypto exchange Binance has been facing challenges in establishing a new bank partner to serve as a fiat on-ramp and off-ramps for its clients in the country, according to a Wall Street Journal report on April 8.
The recent failures of Silvergate and Signature Bank left Binance.US without banking services, depending on middleman’s banks to store funds on its behalf, according to the WSJ, citing “people familiar with the matter”.
The regulatory crackdown on banks with crypto clients is also 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 allegedly trading violations. The cryptocurrency exchange has been the focus of a CFTC investigation since 2021.
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Binance.US needs a bank to directly hold its client’s US dollars, but recent attempts to establish direct banking relationships with banks, such as Cross River Bank and Customers Bancorp, have failed.
Binance.US customers have been affected by the lack of a direct bank. In a recent status update, the exchange said that it “was transitioning to new banking and payment service providers over the next several weeks,” adding that some USD deposit services would be temporarily impacted during the transition.
Currently, Binance.US is holding customer funds via financial technology firm Prime Trust. A spokesperson for Prime Trust stated that all funds received from clients are stored through its banking partners.
“We work with multiple U.S.-based banking and payment providers and continue to onboard new partners while upgrading our internal systems to create a more stable fiat platform and offer additional services,” a spokesman for Binance.US told the WSJ.
Binance.US is operating in a similar environment to that which crypto firms are experiencing in the United Kingdom, where banks are moving away from accepting clients from the crypto sector. The few banks still working with crypto firms in the U.K. are requesting more documentation and information about how they monitor clients’ transactions.
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