Binance, the world’s largest crypto exchange, confirmed with CoinDesk’s Helene Braun that U.S. dollar bank transfers will be temporarily suspended beginning Wednesday, Feb. 8. While the beleaguered exchange claims only a fraction of a fraction of its “monthly active users” use such direct bank transfers, the move could be seen as a significant blow. Users withdrew millions of dollars worth of crypto after it announced the suspension, Arkham Intelligence found. It’s unknown right now why Binance made its decision. The situation is made all the more strange by the fact that Binance's U.S. division, Binance US, will still be processing bank transfers, according to a Twitter post. There’s no public timeline yet for when banking services will be restarted. Last month, one of Binance’s banking partners, Signature Bank, increased its U.S. dollar transaction minimum for all Binance users to $100,000, as the bank looks to unwind its exposure to the crypto industry. The exchange also published a blog post noting it will not be able to process USD transfers in a long list of countries, following a SWIFT update.
At the moment, Binance is far from being totally cut off from the fiat-based economy. The recent suspension may make it slightly more annoying for Binance users to exit the crypto economy, but money can still be swapped into dollar denominated stablecoins like tether and USDC, which can be transferred anywhere, or withdrawn from banks in euros or through fintech options like Google or Apple Pay. Though the situation does raise the prospect of a world where crypto is forced to go bankless.
It’s not a total fantasy: The Federal Deposit Insurance Corporation (FDIC) last month warned banks about the significant safety and soundness risks of companies exposed to the crypto industry. The stern statement, co-signed by the Federal Reserve and Office of the Comptroller of the Currency, did not prohibit – or even expressly discourage – banks from working with crypto clients, but many still read it as the beginning of the end for crypto banking. British economics writer France Coppola told CoinDesk, “I think all the banks will exit unless crypto companies submit themselves to much more intrusive regulation and supervision.” Putting aside crypto’s volatility, she also said the industry comes with severe “exorbitant reputational risk.” “They really can't be seen to be facilitating scams, frauds and money laundering,” she said. Binance will likely be able to weather the recent spike of withdrawals, as it weathered the fears of a possible U.S. Department of Justice indictment and the public backlash against its “proof-of-reserves” statement. The exchange owns some $42.2 billion worth of crypto assets, Arkham said, making an outflow of even a couple hundred million dollars worth of assets seem like a blip. Still, the reputational risks are harder to manage. Users go to exchanges that are reliable and convenient, and the loss of banking services will certainly affect that. Crypto was supposed to usher in a world without intermediaries, but perhaps has only shown us how valuable – if risky – they remain. – D.K. @DanielGKuhn [email protected] | 