Binance will temporarily suspend USD bank deposits and withdrawals on Wednesday, Feb. 8, 2023, a spokesperson said.
The spokesperson for the largest exchange said that the suspension will only affect 0.01% of its users and that they hope to restart the service soon.
Binance’s New Relationship With Signature Offers Clues
The spokesperson did not indicate the reason for the suspension of services. Other payment methods, including Apple Pay and Google Pay, will work regardless, they added. Binance.US Customer customers will not be affected by the suspension.
While the exchange has not provided details on why it is suspending transfers, the size of the user base suggests that a revised relationship with Signature Bank could be at least part of the reason.
A Bloomberg report on Jan. 22, 2023, revealed that 0.01% of Binance’s customers would be affected by a policy change by New York-based Signature Bank to only SWIFT transfers of $100,000 or more, starting on Feb. 1, 2023.
Supporting this theory is a substantial pullback by Signature to reduce its crypto asset exposure after the collapse of FTX last year.
Signature said in December 2022 that it would offload $10 billion in deposits from crypto exchanges. Analysts then suggested that Signature’s move could see Silvergate Capital, another bank with close crypto ties, capture Signature’s market share.
Originally one of crypto’s only allies in the banking sector, Silvergate’s Exchange Network enables 24-7 conversions between fiat and crypto.
Banks With Crypto Business Under Pressure
A general reluctance by banks to do business with crypto firms comes after banking regulators said they would be closely watching institutions that chose to do business with crypto firms. The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have vowed to prevent unmanageable crypto risks from spilling over into the traditional banking system.
U.S. prosecutors have launched an inquiry into Silvergate’s alleged involvement in a scheme to defraud customers of collapsed exchange FTX. In a Dec. 5 note, Silvergate CEO Alan Lane said that the bank monitors accounts for suspicious activity and files subsequent reports in compliance with banking regulations.
Last month, the Federal Reserve rejected an application by Wyoming’s Custodia bank to become a Federal Reserve member. It cited an incomprehensive risk management framework.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.