Binance.US OTC Trading Halt: Is Under-Fire Exchange Preparing to Exit American Market?
Will there be a true crypto exodus? | Credit: Shutterstock
Key Takeaways
- Binance.US announced it will soon stop all USD-based trades on the platform
- Several governmental entities have criticized the SEC for taking longer than necessary to draft clear regulations
- Ripple CEO Brad Garlinghouse states that the “US is already behind on the crypto industry”
Binance.US has announced that the crypto exchange will be halting Over-The-Counter crypto exchanges, as well as the option of providing Trading Pairs to its customers. Following the news, Binance.US announced that it will soon halt all USD trades on the platform, including withdrawals and deposits.
Binance’s SEC Troubles
The ongoing legal battle between Binance, its founder Changpeng Zhao and the US Securities and Exchange Commission is forcing Binance.US to take measures that severely affect its profitability and survivability in the US Market.
It all started when the SEC filed 13 lawsuits against Binance and its founder Changpeng Zhao, claiming a “web of deception”. The lawsuits came as a result of an interrogation that went on since 2019. The SEC claims that Binance created a “web of deception”, and among the allegations is that Binance commingled customer funds with corporate funds, also claiming that the crypto trader inflated trade volumes to delude investors. Moreover, the SEC claims that Binance was involved in wash trading, the act of repetitive purchase and selling of the same currency to deliberately inflate its value.
The list of accusations does not only involve Binance but also its founder, CZ. The SEC claims that the founder has personally received $62.5 million from Binance’s bank accounts. Legal experts speculate that the DOJ might actually file criminal charges against Binance and CZ for evading US regulators and defrauding Binance customers.
Following SEC’s claims against Binance, the crypto trader took a serious hit in its financial department. At first, trade volumes on the platform slowed down due to fears of its stability, and security. Then, Binance’s own cryptocurrency, BNB saw a sharp drop in value by 7%, with Bitcoin (BTC) taking a 5% drop as collateral damage.
Many Binance Operations Shutting Down
Binance.US announced it will soon stop all USD-based trades on the platform, rendering the platform to provide crypto-only exchanges. Binance.US has also announced that it will halt Over-The-Counter trades on its platform, while also suspending Trading Pairs, most specifically Trading Pairs connected to the world’s leading cryptocurrency token, Bitcoin (BTC). Should Binance’s legal issues persist, the platform will find itself incapable of providing services that are integral to its survivability as a crypto exchange.
On top of all that, the SEC has requested the federal government to freeze all Binance.US assets around the world, claiming fears that CZ & co might tamper with financial evidence that would be imperative to the SEC’s case against the company.
SEC Vs US Crypto Industry
The SEC, led by Chair Gary Gensler is simultaneously fighting the crypto industry on 2 other fronts. The first front is Coinbase, Binance’s biggest competitor and the world’s second-largest crypto exchange. SEC’s lawsuit against Coinbase claims that the crypto exchange operates illegally as a trader of registered goods. The case comes as a legal paradox for 2 reasons:
- SEC approved Coinbase’s IPO (COIN) in 2021, legally enabling them to trade cryptocurrencies
- The government has used Coinbase as a trading platform to sell off crypto tokens it has seized in the past.
The second front on which the SEC is fighting against the crypto industry is with Ripple, another crypto exchange platform. In its lawsuit against Ripple, the SEC claims that Ripple is illegally selling XRP, a token that SEC sees as a registered security. SEC’s case however seems to be a weak one, with legal experts speculating a 25% chance of Ripple getting an outright win, while speculating a 3% chance for SEC to get an outright win. During the legal deliberations, Ripple requested to bring up the Hinman documents, a motion that the SEC attempted to dismiss but failed. The Hinman documents refer to messages that accompanied a speech by a previous SEC director that helped clarify the government’s stance on digital assets, such as cryptocurrencies.
Where’s The Issue?
To put it simply, the issue with cryptocurrencies in the US has to do with creating clear regulations that define the trade process and the legal identity of digital assets such as cryptocurrencies. For that reason, the SEC struggles to make up its mind on whether exchanges such as Coinbase and Ripple are legally permitted to trade them.
Several governmental entities have criticized the SEC for taking longer than necessary to draft clear regulations that define the parameters of the trade and protect US customers. Unlike the US, the EU has created its own set of crypto-related regulations that ensure the safety of customers while limiting the ability of crypto holders to trade in illegal goods using cryptocurrencies.
US Crypto Exodus
The term “US Crypto Exodus” was first coined by Brad Garlinghouse, CEO of Ripple when he was discussing the danger of the lack of crypto trading regulations in the US. In an interview with Bloomberg, Garlinghouse states that the “US is already behind on the crypto industry”, adding that “other countries like Singapore have taken the time to create a clear framework of regulations to govern the crypto industry.” When the interviewer asked if there’s a threat of the crypto industry leaving the US if proper regulations are not put in place, Garlinghouse replied saying “It already is”. We can see proof of this in the case of Coinbase already receiving a license to operate in Bermuda.
