The U.S. affiliate of global crypto exchange Binance has struggled to find a bank for its customers’ cash after the failure of Signature Bank left it without a key banking partner, people familiar with the matter said.
Users’ dollar deposits were previously sent to either Signature Bank or Silvergate Capital Corp., decrease; red down pointing triangle according to Binance.US’s website. The failures of Signature and Silvergate, both seen as friendly to crypto companies, left many crypto firms rushing to find new banking partners.
As a stopgap, Binance.US is using at least one middleman to store funds on its behalf. Because money is held at the middleman’s banks, it can slow down the process of sending and moving funds, the people said.
The key difficulty for Binance.US is finding a bank to directly hold its customers’ dollars. At crypto exchanges, bank accounts for user deposits and trading are typically separate from those used for corporate operations, such as payroll and one-off expenses.
Binance.US has unsuccessfully sought to establish direct banking relationships with banks including Cross River Bank, the New Jersey-based lender that serves some crypto and financial-technology firms, and Customers Bancorp Inc., a Pennsylvania-based regional bank, in recent months, the people said.
“We work with multiple U.S.-based banking and payment providers and continue to onboard new partners while upgrading our internal systems to create a more stable fiat platform and offer additional services,” a spokesman for Binance.US said.
Among the reasons that some banks were reluctant to do business with Binance.US was concern over regulatory risk, the people said.
Last month, the Commodity Futures Trading Commission sued the exchange’s larger worldwide affiliate, Binance Holdings Ltd., for allegedly evading U.S. regulations and violating rules designed to prevent illicit financial activity. The company has said the CFTC’s decision to sue was disappointing and that it didn’t “agree with the characterization of many of the issues alleged in the complaint.”
The Securities and Exchange Commission and the Justice Department have been probing the relationship of Binance, which lists no headquarters, to Binance.US at least since 2020, The Wall Street Journal has previously reported.
For now, Binance.US has been storing customer cash via a crypto-services and financial technology firm, Prime Trust LLC, the people said. A spokeswoman for Prime Trust said that any funds received from clients are stored with its network of banking partners.
The crackdown on crypto banking is squeezing digital-asset businesses. While the industry often pitched itself as an alternative to banks, these firms still rely heavily on banks to link up with a financial system that runs on hard currencies such as dollars and euros.
The lack of a direct bank has led to some disruptions for Binance.US customers. In a status update posted on its website Sunday, Binance.US said it would be “transitioning to new banking and payment service providers over the next several weeks” and added that some dollar services would be temporarily unavailable, including wire deposits and withdrawals and Apple Pay and Google Pay deposits.
Wire deposits had been reinstated as of Friday, though Apple Pay and Google Pay deposits were “under maintenance” and debit-card service was undergoing a “partial outage,” the website showed.
Signature Bank was known as a go-to lender in New York commercial real estate, but it made a foray into crypto in recent years. The bank opened deposit accounts for crypto companies and built a payments network popular with them. One of its customers was Binance.US.
Binance.US and Binance say they are separately managed. But both have the same majority owner, crypto tycoon Changpeng Zhao, and internal messages reported by the Journal last month showed that the two exchanges are more intertwined than the companies had previously disclosed, mixing staff and finances.
Federal bank regulators have grown more skeptical of lenders that serve digital-currency firms in the wake of November’s collapse of crypto exchange FTX, and some banks have pulled back from the business amid the regulatory scrutiny. Among them was Signature Bank, which cut ties with the international business of Binance.
While some banks have picked up crypto clients in the wake of the Silvergate and Signature blowups, bankers say they are being selective about which clients they choose to take on.
