Following a lawsuit from the US Securities and Exchange Commission (SEC) against Binance, the famous cryptocurrency exchange, the American arm of Binance, which is known as Binance.US, has announced that customers can no longer trade on its platform using US dollars.
The SEC’s lawsuit against Binance, together with its lawsuit against Coinbase, have seemingly caused significant damage. Binance.US’s banking partners have become uncertain, forcing it to close its crucial payment rails for the transfer of US dollars to its platform.
Recently, Robinhood chose to discontinue supporting transactions in three well-known cryptocurrencies, namely Solana, Cardano, and Polygon, which were classified as unregistered securities in the SEC’s court filings.
Binance.US’s new rules will come into effect as early as Tuesday. Here’s an easy-to-understand breakdown of what the changes mean for customers.
A Temporary Hold on Key Type of Trading
A major role of cryptocurrency exchange platforms such as Binance is to act as a portal for customers to convert their US dollars into cryptocurrencies such as Ether or Bitcoin. However, according to its announcement, Binance.US will temporarily stop providing this service and has taken necessary measures to transition to a crypto-only exchange.
Thus, enthusiasts who wish to trade using cryptocurrency can still exchange their digital currency with other cryptocurrencies. However, the purchase and sale of digital currencies using US dollars will be prohibited.
Deadline for Withdrawing Funds
Apart from being a marketplace for cryptocurrency trading, customers also store their currency, whether traditional or digital on cryptocurrency exchange platforms. In its statement, Binance.US confirmed that it would halt deposits of US dollars and advised users to withdraw any dollars they had on the platform by June 13.
Crypto Trading Still Available
Binance.US stated that any dollars left on the platform can be converted into stablecoins — a form of cryptocurrency aimed at maintaining a constant price of $1. Through its announcement, the company aimed to reassure its clients that their digital holdings remain safe as the firm maintained 1:1 reserves for all its clients’ assets, making their funds secure and available.
Are Other Exchanges Likely to Impose Similar Restrictions?
This remains to be seen and will likely depend on reactions from US banks that work with other crypto firms. It is noteworthy that Coinbase, which was also sued by the SEC, has not made a similar announcement. But while Binance and Coinbase have both been sued by the SEC, the cases against them are different. While the SEC has accused Binance of mishandling customer funds and channeling billions of dollars to a trading firm owned by the company’s chief executive, Changpeng Zhao, Coinbase is accused of offering cryptocurrencies that meet the legal definition of securities like bonds or stocks traded on Wall Street, and thus should require regulation.
