Binance rubs SEC the wrong way. In what seems like a regulatory issue, Binance, one of the leading cryptocurrency exchange in the world, will no longer offer its services to users in the United States of America. Binance has indicated this through a change in its terms of service.
According to the updated terms of service:
“Binance is unable to provide services to any US person. Binance maintains the right to select its markets and jurisdictions to operate and may restrict or deny the services in certain countries at its discretion.”
Binance rubs SEC the wrong way loses 40 million visitors
The terms of service were updated on June 14. Notably, the exchange gets 15 percent of its traffic from the United States, which translates to slightly above 40 million visitors in the last six months. India and Japan are the other top 2 countries where Binance draws most of its traffic. The two countries accounted for slightly above 10 million visitors each in the last 6 months.
A look at the updated terms of service reveals that Binance will not differentiate retail from institutional; all US users will be blocked. Unfortunately, the amount of traffic Binance got from the United States in the last six months has been on the decline. For example, at the beginning of last year, US users accounted for roughly 30 percent of users visiting Binance. The figure now stands at 15 percent.
Binance rubs SEC the wrong way, pain, gain, and lessons
On June 13, a day before the updating of its terms of service, Binance’s CEO, Changpeng Zhao, said:
“There will be a few restrictions on Binance.com accompanying this. But some short term pains may be necessary for long term gains. And we always work hard to turn every short term pain into a long term gain.”
Binance seems to have learned a lesson from EtherDelta, a decentralized crypto exchange. The United States Securities and Exchange Commission (SEC) charged its founder for running an unregistered virtual currency exchange. The SEC considered EtherDelta to be an “unregistered national securities exchange.”
With Binance’s decentralized exchange, it would be hard for Zhao Changpeng to control who will be issuing tokens which the SEC considers to be securities. As such, allowing US user to trade on the platform would see his fate follow that of EtherDelta’s founder. To minimize or eradicate being charged, blocking US users seems like the only way out.
Other exchanges are leaving the US market
Binance is following other top exchanges which announced that they would cut ties with their US customers. For instance, Bittrex has already indicated that “on June 21, certain markets will no longer be accessible to US customers.” Additionally, Poloniex, while expressing its commitment to “complying with regulatory requirements in every jurisdiction,” has already disabled 9 markets to customers in the US.
“[Disabling markets] is a result of regulatory uncertainty in the US market. Specifically, it is not possible to be certain whether US regulators will consider these assets to be securities.”
There’s a high probability that Binance is also fearing the repercussions that may arise from running an unregistered securities exchange in the United States. Consequently, Binance will witness a massive reduction of its users.