Crypto exchange giant Binance just halted USD bank transfers. So… is it about to collapse?
Binance, the biggest crypto global exchange by trading volume, has announced that it will temporarily suspend US dollar (USD) deposits and withdrawals this Wednesday.
And its left crypto investors and traders scratching their heads and perhaps a little nervous given the not-dead-yet fears of further “crypto contagion”.
Here’s the announcement, made via a tweet earlier this morning (AEDT).
From February 8th, we will temporarily suspend all USD bank transfers.
Only a small proportion of our users will be impacted by this and we are working hard to restart the service as soon as possible.
All other methods of buying and selling crypto remain unaffected.
— Binance (@binance) February 6, 2023
So, should we be worried? Time to dump everything and get any/all crypto the hell off exchanges while we still can?
Not necessarily, no. (Well, actually NOT keeping most of your crypto on any exchange and instead opting for cold-storage self custody is always a good idea.)
But the fact Binance and its prominent CEO Changpeng “CZ” Zhao has provided little in the way of satisfactory explanation is at least some cause for concern.
All other crypto trading methods on Binance will remain unaffected, according to the exchange. And that includes AUD and Euro movements on and off the exchange as well as credit card usage, Google Pay and Apple Pay.
Still, pausing US dollar trading is no small thing.
CZ explained that the team were working to “quickly resolve the issue”, adding that only 0.01% of the exchange’s monthly active users will be affected by this.
It is worth noting that USD bank transfers are leveraged by only 0.01% of our monthly active users.
However, we appreciate that this is still a bad user experience and the team is working on quickly resolving this issue. https://t.co/heCfWIomAX
— CZ 🔶 Binance (@cz_binance) February 6, 2023
Meanwhile Binance US, a separate unit of the company regulated by the US government, clarified in a tweet that it’s not affected by the suspension. This means the halt only applies to non-US customers who transfer money to or from bank accounts in USD.
— Binance.US Customer Support (@BinanceUShelp) February 6, 2023
According to a CNBC report, “millions of dollars worth of crypto flowed out of Binance after it announced the suspension, but the company says it remains ‘net positive'”.
Binance’s exchange token BNB appears to be largely unaffected at the time of writing and is following the general crypto majors 24-hour trend, down a fraction (-1.12%).
Attempting to nail down exact reasons for the Binance move is a tentative wade into speculative waters. But the CNBC article does bring up some recent history that serves as a reminder about the exchange’s US banking woes.
In late January, as reported by both Bloomberg and CoinDesk, Binance confirmed that the exchange’s US banking partner Signature Bank would not be supporting transactions for crypto exchange customers of less than US$100k as of February 2.
Hardly a very accommodating stance from Signature, which may be the result of some trepidation towards the crypto industry post FTX blow-up.
“As a result, some individual users” might not be able to use SWIFT bank transfers to purchase or sell digital assets “with/for USD” for smaller amounts, wrote Binance in a statement at the time.
The exchange also indicated at that time that it was “actively working to find an alternative solution”, while updating its 144-strong list of countries in which SWIFT transfers are not supported. (Note: Australia ain’t on it as yet.)