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Binance.US goes crypto-only after banking partners will no longer process USD

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(Kitco News) - Binance.US, the American arm of the world’s largest crypto exchange, will no longer process U.S. currency, the company announced Friday.

On Monday, the U.S. Securities and Exchange Commission (SEC) filed a 13-charge lawsuit against Binance and its CEO, Changpeng Zhao (CZ) accusing them of operating an illegal securities trading platform in the U.S. and misusing customer funds.

The following day, a United States District of Columbia court granted the SEC’s request for an emergency restraining order to freeze the assets of Binance.US. As a result of the freeze, Binance.US can no longer continue to process U.S. dollar deposits and withdrawals.

Binance.US published a post on Twitter late Thursday announcing that they would become a crypto-only exchange.

“[I]n light of the Commission's increasingly aggressive tactics, our payment and banking partners have signaled their intent to pause USD fiat channels as early as June 13, 2023, meaning our ability to accept USD fiat deposits and process USD fiat withdrawals will be impacted,” they wrote, adding that they are notifying users promptly so they can “take necessary actions as we transition to a crypto-only exchange.”

Binance.US has encouraged customers to withdraw their USD via bank transfer by June 13th, 2023. “Due to elevated volumes and weekend bank closures, ACH withdrawals may take longer than usual to process,” they said.

The exchange will also be suspending USD deposits and recurring buy orders effective immediately, though they said any deposits already initiated will be processed. “Any USD balances remaining on the platform after June 15th, 2023 may be converted to stablecoin that can be withdrawn on-chain,” they said.

Beginning June 12, the exchange will start delisting U.S. dollar-denominated trading pairs such as BTC-USD, but will continue to support stablecoin pairs such as BTC-USDT. “Cryptocurrency services remain fully operational, including: crypto trading, staking, deposits and withdrawals,” they wrote.

“Until we secure more stable banking partners, Binance.US will remain a crypto-only exchange - at least for a time,” they said. “Thank you for your continued support as we fight for a path forward for those who want a thriving digital asset marketplace in America.”

In its filing on Tuesday, the DC court wrote that they agreed with the SEC’s position that it was necessary to freeze all Binance.US funds on an emergency basis.

“The Commission has made a sufficient and proper showing in support of the relief granted herein,” the court wrote, “by setting forth evidence from which an inference of a violation can be drawn and showing a likelihood that the Commission will prevail at trial on the merits and that the Defendants have engaged in and, unless temporarily restrained and enjoined by order of this Court, will continue to engage in acts, practices, and courses of business constituting violations” of the Securities Act and the Exchange Act.

By granting the order, the court effectively froze the assets of Binance.US and its affiliated entities, preventing them from transferring the assets except to recognized third-party custodians. It also requires Binance to repatriate any assets held outside of the United States on behalf of Binance.US customers.

Binance has until Sunday to ensure that any and all access to Binance.US customers’ funds is limited to the U.S. entity, and 30 days to transfer to Binance.US any assets that it holds in offshore entities on behalf of U.S. customers.

Binance.US will face an uphill battle finding banking partners to support its U.S. dollar business in light of this week’s revelations. On Wednesday, Sachin Verma, Assistant Chief Accountant in the SEC’s Division of Enforcement, submitted a new court filing in support of their lawsuit detailing billions of dollars in transfers between the exchange’s U.S. bank accounts, entities controlled by CZ, and other firms.

Verma said the information in the filing “is based upon my personal review of financial records such as bank statements, deposits, canceled checks, wire transfers, signature cards, and other account documents produced to the SEC by the defendants, Silvergate Bank, Signature Bank, FedWire and other parties.”

The filing mapped the complex flows between various Signature and Silvergate bank accounts, some ostensibly belonging to Binance.US and others directly controlled by Zhao, and a web of other offshore entities such as Merit Peak and Key Vision allegedly controlled by Zhao and his associates.

Verma alleges that the evidence shows customer funds were illegally diverted to Sigma Chain, a trading entity controlled by Zhao, and used to engage in fraudulent trades that inflated Binance’s true trading volume. The filing also says that Binance concealed the fact that it commingled billions of dollars in customer assets that were sent to Merit Peak, another third-party entity owned by Zhao.

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