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CZ Lists Reasons Why Binance Decided Not to Buy a Bank

AA News - Jordan Lyanchev 2023-05-31 03:15

Following increased regulatory action from the SEC and other local and global watchdogs, members of the crypto community have been worrying about the industry’s future relationship with the banking sector.

Pivot to Europe in The Cards

The restlessness surrounding future crypto regulation was amplified following the collapse of both Signature Bank and Silvergate Bank, both of which supplied much of the infrastructure needed to keep the crypto world tethered to the banking sector.

To make matters worse, the SEC’s refusal to respond to requests for information from Coinbase and others signals to crypto platforms willing to cooperate that clear regulatory agreements with U.S. institutions made in good faith may be a ways off.

Some firms – like Gemini, who recently announced the establishment of an EU HQ in Ireland – decided to look towards Europe instead.

Binance Thinks Outside The Box

Binance does not operate within the United States. In order to provide service to U.S. customers, Binance.US was launched. Although the two platforms share the same name, Binance.US has a different organizational structure and does not report to CZ or other members of the global company’s C-suite.

For several months, Binance has been looking for solutions to the tenuous relationship that crypto currently has with the banking sector, especially following recent spats with Australian banks and fiat providers.

Fellow Binancians,

We regret to inform you that with immediate effect we are unable to facilitate PayID AUD deposits for Binance users due to a decision made by our third party payment service provider. We understand from our third party payment service provider that Bank…

— Binance Australia (@Binance_AUS) May 18, 2023

In an interview taken on the Bankless podcast, CZ stated that he and his team briefly floated the idea of simply buying a bank outright in order to solve these kinds of issues without depending on others. However, they ultimately decided against it.

According to the exec, the problems cryptocurrency platforms face would not be solved by simply buying a bank. Even if a bank was purchased in the U.S., this would not guarantee regulatory approval in other territories.

Furthermore, the costs involved in buying and operating a bank could prove useless since regulators could simply forbid the bank from interacting with crypto anyway.

“Banks are not cheap. Banks are very expensive for very little business revenue. […] The amount of capital required is quite high, and the regulatory approval for buying a bank is the same or more as setting up a new bank, which is very onerous If the banking regulators say, ‘Look, you can’t work with crypto’ then they can take your license away if you do. So buying a bank doesn’t prevent regulators from telling you, “No, you can’t touch crypto.” Even then, we would need corresponding banks all over the world.”

Nevertheless, CZ stated that he and his company are still considering making smaller investments in the banking sector, even if buying a banking institution outright is completely off the table.

The post CZ Lists Reasons Why Binance Decided Not to Buy a Bank appeared first on CryptoPotato.