The cryptocurrency giant is in turmoil across the Atlantic. Following a subpoena issued by the Security and Exchange Commission (SEC) on June 5, the US branch of Binance, the leading digital asset exchange platform, announced on Thursday June 8 that it was suspending dollar deposits from its US customers.
Severe threat to the platform
The shock announcement was prompted by the SEC’s request to the courts on Tuesday June 6 to freeze assets affiliated with the company and its CEO, Changpeng Zhao. “There is judicial uncertainty over a potential freeze of Binance US funds, so the company decided to communicate in advance to warn its customers,” Stanislas Barthelemi, crypto consultant at KPMG, tells La Tribune. Potentially, “the courts could prohibit all banking partners from carrying out transactions for Binance US, which would quite simply close the dollar floodgates on the company”, adds the consultant, who is keen to point out that Binance US “is a small player across the Atlantic, with less than ten percent of the market”
Note that this risk of Binance’s funds being frozen is limited to customers with accounts in the USA, who will normally still be able to send and withdraw their funds in crypto-assets.
“Ultimately, Binance could face a large fine from the courts and possibly closure in the US,” warns Stanislas Barthelemi.
Outside the U.S., “this news is bad for communication and confidence in Binance, and raises the risk that other jurisdictions around the world will in turn turn turn their noses into the company’s accounts”, he worries.
As a result, nearly $780 million (€729.8 million) was withdrawn from Binance in the 24 hours following the SEC’s announcement, data company Nansen announced on Tuesday. And this isn’t the first time that, fearing the suspension of business also known as the “FUD” phenomenon (“Fear, Uncertainty and Doubt”), crypto investors have withdrawn their funds. By March, the SEC’s initial threats had led to the withdrawal of $2.2 billion worth of cryptocurrencies. And by the end of 2222, following the FTX scandal, over $900 million had been withdrawn. Binance was even forced to temporarily suspend certain withdrawals.