Binance.US Faces Another Wall; Could Impact Clients Using Dollar Deposit Services

Binance.US, the American arm of the world's largest centralized cryptocurrency exchange by trading volume, faced another wall in finding a banking partner to handle its customers' cash, which could significantly impact its dollar deposit services in the country.

The struggle Binance.US is currently facing stemmed from the spectacular collapse of crypto-friendly banks, particularly Signature Bank, last month, leaving it without a banking partner, the Wall Street Journal reported, citing people familiar with the matter.

At centralized cryptocurrency exchange platforms, bank accounts for user deposits and trading are usually separate from those utilized for corporate operations like one-off expenses and payroll.

Binance.US, for its part, sends its customers' U.S. dollar deposits to Signature or Silvergate, but the failure of these banks triggered it to rely on a middleman as a temporary solution.

This middleman, which is the financial technology firm Prime Trust, said Binance.US' customers' money is stored through its banking partners, which, people familiar with the matter claimed, could significantly slow down the process of moving and sending funds.

Binance.US previously confirmed this issue in a recent update when it informed its customers that it is "transitioning to new banking and payment service providers over the next several weeks," advising them that some U.S. dollar deposit services would be momentarily affected during the transition.

On its end, Binance.US tried to find a banking partner to hold its clients' funds, but its attempts to make the New Jersey-based bank that accommodates crypto and financial-technology firms, Cross River Bank and the Pennsylvania-based regional bank Customers Bancorp, have failed.

"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 spokesperson of Binance.US said in a statement.

The report also pointed out that one of the major reasons behind the reluctance of banks to do business and partner with Binance.US is the growing concern over regulatory risk.

Binance has been in the crosshairs of U.S. financial regulators over the past weeks and was sued by the Commodity Futures Trading Commission sued last month for allegedly violating rules to prevent illegal financial activities and for evading regulations of the country.

Moreover, the Securities and Exchange Commission (SEC) and the Justice Department (DOJ) have been investigating the relationship between Binance and its American arm.