The crypto company Binance.US will suspend US dollar deposits as its banking partners prepare to pause the channels to withdraw US dollars from the exchange, days after regulators sued Binance and its chief executive, Changpeng Zhao.
The US arm of the world’s largest crypto exchange said on Thursday that it was taking “proactive steps” in its transition to a crypto-only exchange for the time being.
While trading, staking, deposits and withdrawals in cryptocurrencies would remain fully operational, customers would be unable to deposit or withdraw US dollars from the exchange, as “our payment and banking partners have signalled their intent to pause USD fiat channels as early as June 13, 2023”.
Binance.US said it encouraged its customers to “withdraw their USD” by 13 June but warned that because of elevated volumes, withdrawal might take longer than usual to process. The company stressed that customer funds were “safe, secure and available”.
Binance.US is an offshoot of Binance.com, a cryptocurrency exchange that had grown rapidly after starting operations in 2017 into a company making billions of dollars of revenues, mostly from transaction fees as customers bought and sold cryptocurrencies. Binance and other exchanges provided a key entry point for many people into cryptocurrencies, allowing people to buy assets such as bitcoin using “fiat” currencies such as the US dollar.
Binance’s success made Zhao, also known as CZ, one of the world’s richest people on paper, and he has been a key advocate for the crypto industry. Forbes estimated his net worth at $10.5bn (£8.4bn) this week, although much of that wealth is derived from his ownership of Binance.
Regulators have for several years been examining the features of some digital assets to decide whether they are in fact new versions of securities such as stocks or bonds. Securities trading is tightly regulated across the biggest financial markets.
On Monday, the US Securities and Exchange Commission (SEC), a financial watchdog, accused Binance and Zhao of operating a “web of deception”, charging him and his exchange with 13 offences including violations of the US Securities Act and acting as an unregistered exchange.
The SEC filed a lawsuit against Coinbase, the largest US cryptocurrency platform, a day later.
The SEC has escalated its crackdown on the crypto industry in recent months after the collapse last year of the Bahamas-based FTX, whose founder, Sam Bankman-Fried, has now been charged with securities fraud, money laundering and other offences.
Earlier on Thursday, US regulators said they supported a freeze on Binance’s assets, according to an SEC court filing.
In its statement, Binance.US accused the SEC of “extremely aggressive and intimidating tactics in its pursuit of an ideological campaign against the American digital asset industry”.
The company that this had created challenges for the unnamed banks it worked with.
Binance.US says it is an entirely separate exchange that is run separately from its parent company. However, among the central allegations from the SEC is that Binance and Zhao failed to truly split the US company from the main exchange from which it was spun off.
The SEC alleged that the parent company of Binance.US was set up by Binance and Zhao to “knowingly circumvent US law while secretly controlling the Binance.US platform’s operations for their benefit”, according to a brief filed by the regulator.
The SEC alleged that in reality, Binance and Zhao “subverted their own controls to secretly allow high-value US customers to continue trading on the Binance.com platform”.
Zhao has repeatedly and strenuously denied wrongdoing. On Twitter he has retweeted a series of criticisms of the SEC by others, and on Thursday night he retweeted the Binance.US announcement on suspending dollar deposits.
Binance has said it “respectfully disagrees” with the allegations, and that “any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong”.