June 9 (Portal) – Binance’s US subsidiary announced that it is halting dollar deposits, while trading platform Robinhood Markets (HOOD.O) announced that it would be delisting some crypto tokens after the US Securities and Exchange Commission had intensified its crackdown on the crypto sector.
Binance.US, Binance’s rumored independent partner, said in a tweet Thursday that its banking partners are preparing to halt dollar withdrawal channels as early as June 13, after the US Securities and Exchange Commission found a court to rule asked to freeze its assets. Customers have until Tuesday to withdraw their money.
The development is the latest setback for the world’s largest cryptocurrency exchange and raises questions about whether its U.S. operations can survive the SEC lawsuit alleging that Binance manipulated its trading volume and commingled client assets, among other civil charges it denies becomes.
“This is very serious for Binance.US,” said Clara Medalie, director of research at Kaiko, a data provider for digital assets.
“Binance.US’ inability to offer USD trading services in a region where the exchange was specifically designed to operate is an existential threat.”
On Friday, Robinhood said it would remove from its platform three cryptocurrency tokens that the SEC identified as securities in its lawsuit against Binance, and the following day filed a separate lawsuit against Coinbase (COIN.O), a sign that that the SEC litigation has already started rippling through the crypto market.
The SEC on Monday indicted Binance, its CEO and founder Changpeng Zhao and the operations of Binance.US, alleging on 13 counts that Binance engaged in a “web of deception” that artificially increased trading volume and diverted customer funds and Binance and Zhao secretly controlled the US company while publicly claiming it was independent.
Binance did not immediately respond to a request for comment. She said she will “vigorously” defend her platform, claiming the SEC’s reach is limited because Binance is not a US exchange.
In another filing Tuesday, the SEC asked a federal court to freeze Binance’s U.S. assets, including more than $2.2 billion in cryptocurrency client assets and approximately $377 million in U.S. dollar-denominated bank accounts , according to the agency. The SEC raised concerns that the company could move those funds overseas. Binance.US called the request “unjustified”.
On Thursday, Binance.US said the SEC action created “challenges” for its financial services providers and that the exchange would stop accepting dollar deposits as part of plans to move to a “crypto-only exchange.”
[1/2] The Binance US logo is seen at a booth during the 2022 Bitcoin Conference in Miami Beach, Florida, the United States, April 6, 2022. Portal/Marco Bello/File Photo
Investors had withdrawn more than $31 million from Binance.US over the past 24 hours, according to data firm Nansen as of Friday 12:00 p.m. EDT (1600 GMT).
BAM Trading, the operator of Binance.US, holds client funds at California-based Axos Bank, according to a May 26 letter from BAM Trading’s attorneys to the SEC, released Tuesday by the SEC.
Axos did not immediately respond to a request for comment.
Binance.US has struggled to find banking partners following the failure of Signature Bank, The Wall Street Journal reported in April.
Binance.US said crypto-denominated trading, deposits, withdrawals, and “staking” — where users deposit cryptocurrencies for use in blockchain transactions — would remain fully operational.
“REGULATORY GRAY AREA”
Crypto companies started out in a regulatory gray area, but the SEC, chaired by Gary Gensler, has consistently asserted its jurisdiction over the industry, arguing that most tokens are securities and should be subject to the same disclosure rules.
Other U.S. crypto exchanges are likely to be in the firing line due to this week’s lawsuits, which add some commonly traded tokens like Solana, Cardano, and Polygon to the number of cryptocurrencies the SEC has identified as securities. Robinhood announced that it would be removing these three coins effective June 27th.
Binance and Coinbase’s SEC lawsuits “created a cloud of uncertainty surrounding these assets and as a result, our team has decided to end support for them,” the company tweeted.
On Thursday, rating agency Moody’s changed its outlook for Coinbase from “stable” to “negative,” citing the potential impact of the SEC lawsuit. Coinbase shares were last down 1.9% at $53.85.
Coinbase did not immediately respond to a request for comment.
Reporting by Hannah Lang in Washington, Elizabeth Howcroft in London and Rae Wee in Singapore; additional reporting by Tom Wilson in London and Rahat Sandhu in Bengaluru; Edited by Michelle Price and Matthew Lewis
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Hannah Lang