What Does Regulatory Pressure Mean For Binance?


The world’s largest cryptocurrency platform, Binance, is currently in the crosshairs of a number of U.S. regulators, raising concerns about its future.

Key Takeaways

  • U.S. regulators are turning up the heat on Binance, including the Department Of Justice, the SEC and the New York Department Of Financial Services (NYDFS).
  • The native BUSD stablecoin and the company’s acquisition of Voyager Digital’s assets have both been subject to restrictions.
  • It is unlikely that Binance will leave the U.S. market but it may have to re-evaluate some of its projects in areas where it is being targeted.

U.S. Crypto Pressure And Binance

U.S. regulators are cracking down on the crypto industry following the collapse of FTX. The Department Of Justice (DOJ), Securities And Exchange Commission (SEC), and New York Department Of Financial Services (NYDFS) are all scrutinizing Binance.

“Binance is stuck in the middle of a coordinated attack on crypto by U.S. financial regulators,” said Thomas Hogan, a senior research at the American Institute for Economic Research. “Binance is being targeted because it’s structured like the now-defunct crypto exchange, FTX—an offshore entity with ‘regulated’ U.S subsidiary.” Binance declined to comment.

In 2019, Binance.com stopped operating in the U.S. in order to comply with Know Your Customer and Anti Money Laundering rules. Instead, Binance.US was launched, a crypto-exchange based in the U.S. that licenses the Binance name but is managed by BAM Trading services.

Regulatory Action Against Binance

It’s not just the number of regulators looking into Binance that is notable, but also the actions taken against both its U.S. branch and the company itself. Product offerings, business decisions, and operations of both entities have all been under the microscope of one regulator or another.

Regulators And The Voyager Acquisition

The SEC objected to Binance.US’ acquisition of bankrupt crypto lender Voyager Digital for $1.02 Billion. According to court documents, one of the main worries for the SEC is the ability of the U.S. to protect investor assets. The regulator alleges that the company has not provided enough information regarding internal controls and the custody of customer assets, as well as whether third party affiliates will have access.

Following the objections, Reuters reported that Binance.US accessed an account at California-based Silvergate Bank (SI) and transferred $400,000,000 into another account. A spokesperson for Binance.US said the

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U.S. regulatory bodies have raised some doubts. The NYDFS claims Voyager, which operated an “illegal virtual currency” in New York, is not licensed within the state, and hence not qualified to be approved. Furthermore, a “asset purchase agreement” is in place which is a legal requirement.

The Texas regulators said that Voyager’s Creditors will have better chances of recovering if the firm decides to sell its assets than if it is involved in a case that involves creditors. If the Binance.US deal is accepted and FTX’s trading arm becomes operational Alameda Research, You can recover a large loan amount. Moreover, the Texas Regulators are also questioning whether customers will sign the terms of usage. BinanceAfter the deal,.US “may even effectively permit Binance.com to act in the U.S. even though Binance.com purportedly does not deal with U.S. customers.” New Jersey These concerns are being addressed by the relevant authorities.

Authorities And Binance Stablecoin BUSD

The Binance BUSD, the stablecoin that was once the third-largest stablecoin in market cap, was hit by the NYDFS after it purchased a crypto platform Paxos Stop minting BUSD.

In response, the regulatory agency considered the action a result of “several unresolved issues related to Paxos’ oversight of its relationship with Binance in regard to Paxos-issued BUSD.”

Binance CEO Changpeng Zhao Tweeted that many customers have left BUSD and that his company would likely do the same.

As a result of the NYDFS order: BUSD lost approximately $2.5 billion market cap due to the majority of those funds moving into Tether According to another tweet, stablecoin (USDT) Zhao. Crypto Exchange Coinbase (COIN), BUSD was removed from its trading platform. Binance It is quickly focusing its attention on TrueUSD stablecoin. In just a week, it has produced approximately $130 million worth of tokens and catapulted itself to the fifth position in terms of market capital.

The SEC is also reported to be increasing its crackdown on stablecoins. Paxos For issuing USD. It has already taken suitable action against Terraform Labs over TerraUSD stablecoin, and its founder.

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