Just days after it was sued by the Securities and Exchange Commission, the American arm of Binance, the giant cryptocurrency exchange, announced some painful news: It will no longer allow customers to trade on its platform using U.S. dollars.
Banking partners of the exchange’s U.S. unit, called Binance.US, had been spooked by the S.E.C.’s action, the company said, and were shutting down crucial payment rails that allowed dollars to move on and off the platform.
This week, the S.E.C. filed back-to-back lawsuits against Binance and the U.S. exchange Coinbase, two of the largest crypto companies in the world. The S.E.C. said that Binance had lied to regulators and improperly handled customer funds; Coinbase was accused of operating as an unlicensed securities exchange.
The impact of the suits was immediate. Starting on June 27, the trading app Robinhood said it would no longer support transactions in three popular cryptocurrencies — Solana, Cardano and Polygon — that the S.E.C. categorized as unregistered securities in its court filings.
The changes to Binance.US will take full effect as early as Tuesday. Here’s what the announcement means for customers.
A pause in a crucial type of trading
One of the main roles of a crypto exchange is to act as a portal: A customer can log on, and convert dollars into cryptocurrencies like Bitcoin or Ether.
Binance.US will no longer offer that service, at least for awhile, according to its announcement. In a message to customers, the company said it was “taking necessary actions as we transition to a crypto-only exchange.”
That means trading enthusiasts will still be able to use their crypto to buy other digital currencies — spending their Bitcoin on a bit of Ether, for example. But buying or selling crypto with U.S. dollars will be prohibited.
A deadline to withdraw funds
A crypto exchange is not just a marketplace. Customers also park their holdings on the platform, storing both traditional and digital currencies.
In its statement, Binance.US said it was suspending deposits of U.S. dollars and urged users to withdraw any dollars they had been keeping on the exchange by June 13.
Crypto trading still active
Any dollars remaining 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 sought to assure its customers that their crypto holdings were safe. “To be clear, we maintain 1:1 reserves for all customer assets,” the message said. “Customer funds are always safe, secure and available.”
Could other exchanges impose similar limits?
That will most likely depend on reactions from the U.S. banks that work with other crypto companies. It’s notable that Coinbase, which was also sued this week, has not made a similar announcement.
The cases against Coinbase and Binance are very different. The S.E.C. is accusing Binance of mishandling customer money and funneling billions of dollars to a trading firm owned by the company’s chief executive, Changpeng Zhao.
That accusation has echoes of the implosion of the FTX exchange, which cost customers billions of dollars. Prosecutors claim that FTX’s chief executive, Sam Bankman-Fried, misused customer funds, moving the money to a trading firm he ran and spending it on political donations and real estate.
The S.E.C.’s Coinbase suit is much narrower. The agency is alleging that Coinbase has been offering cryptocurrencies that meet the legal definition of a security, like a stock or bond traded on Wall Street, and should be regulated as such.
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