Just days after being sued by the Securities and Exchange Commission, the US arm of Binance, the giant cryptocurrency exchange, announced painful news: it no longer allows clients to trade on its platform with US dollars.
Banking partners of the exchange’s US unit, called Binance.US, were shocked by the SEC’s action, the company said, and shut down crucial payment rails that allowed dollars to move to and from the platform.
This week, the SEC filed back-to-back lawsuits against Binance and US exchange Coinbase, two of the largest crypto companies in the world. The SEC said Binance had lied to regulators and improperly handled client funds; Coinbase was accused of operating as an unlicensed stock exchange.
The impact of the suits was immediate. As of June 27, trading app Robinhood said it would no longer support transactions in three popular cryptocurrencies — Solana, Cardano, and Polygon — which the SEC has categorized as unregistered securities in its court filings.
The changes to Binance.US will go into full effect on Tuesday. Here’s what the announcement means for customers.
A break in a crucial type of trading
One of the most important roles of a crypto exchange is to act as a portal: a customer can log in and convert dollars into cryptocurrencies such as Bitcoin or Ether.
Binance.US will no longer be offering that service, at least for a while, according to the announcement. In a message to clients, the company said it was “taking appropriate action as we transition to a crypto-only exchange.”
That means trading enthusiasts can still use their crypto to buy other digital currencies, for example by spending their Bitcoin on some Ether. But buying or selling crypto with US dollars will be banned.
A deadline to withdraw money
A crypto exchange is not just a marketplace. Customers also park their funds on the platform and store both traditional and digital currencies.
In its statement, Binance.US said it was suspending US dollar deposits and urging users to withdraw any dollars they held on the exchange before June 13.
Crypto trading still active
Any remaining dollars on the platform can be converted into stablecoins, a type of cryptocurrency designed to maintain a constant price of $1, according to the Binance.US statement.
And the company tried to assure its customers that their crypto holdings were safe. “For the avoidance of doubt, we maintain 1:1 reserves for all client assets,” the statement read. “Customer money is always safe, secure and available.”
Can other exchanges impose similar limits?
That will most likely depend on responses from the US banks that are collaborating with other crypto companies. It is noteworthy that Coinbase, which was also sued this week, has not made a similar announcement.
The cases against Coinbase and Binance are very different. The SEC is accusing Binance of mishandling customer money and funneling billions of dollars to a trading firm owned by the company’s CEO, Changpeng Zhao.
That allegation has echoes of the implosion of the FTX exchange, which has cost customers billions of dollars. Prosecutors allege that FTX CEO Sam Bankman-Fried misused client money by moving the money to a trading firm he runs and spending it on political donations and real estate.
The SEC’s Coinbase suit is much narrower. The agency claims that Coinbase offers cryptocurrencies that meet the legal definition of a security, such as a stock or bond traded on Wall Street, and should be regulated as such.
