Binance Connect Shocking Closure Amid Legal Chaos | Biswap Confirmed

Binance Connect, the regulated buy-and-sell crypto arm of the Binance exchange was forced to shutdown it’s operation on Aug 16. The news was shared on Twitter/X by Biswap, a decentralized exchange on BNB Chain. In this article we will learn What is Binance Connect, Why it is being shutdown and What implications will this shutdown have on crypto market.

What is Binance Connect ?

Binance Connect, launched on 7th March 2022, is a payment service provider that aimed to connect traditional finance and blockchain technology. Binance Connect, formerly known as Bifinity, was a platform that supported more than 50 cryptocurrencies and various payment methods including Visa and Mastercard. It claimed to offer a bridge between the old and the new financial systems.

What forced Binance Connect to Shutdown

The reason for the shutdown was the lack of card payment support from the service provider. A Binance spokesperson said :

“At Binance, we periodically review our products and services to ensure that our resources continue to be focused on core efforts that align with our long-term strategy. In the last six years, Binance has grown from being an exchange to a global blockchain ecosystem with multiple business lines. We consistently adapt and modify our business approach in response to changing market and user needs.”

However, Binance, the parent company of Binance Connect, has also been facing serious legal issues in the U.S.

Binance Under Regulatory Scrutiny 

DOJ Considers Criminal Charges Against Binance

The Department of Justice (DOJ) is reportedly considering criminal charges against Binance, which could trigger a market panic. The DOJ is worried that indicting Binance could lead to a similar scenario as the collapse of FTX, another crypto platform. The DOJ is exploring alternative options, such as fines or deferred agreements, to avoid causing chaos.

SEC Investigates Binance for Selling Unregistered Securities

Binance and its founder, Changpeng Zhao, are under investigation by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC accuses Binance of operating an unregistered exchange in the U.S., allowing Americans to access Binance’s offshore platform. The potential indictment is part of a wider discussion on crypto enforcement and regulation in the U.S., highlighting the need for clear rules in the crypto industry.

Additionally, the SEC has filed a civil lawsuit against Binance, alleging multiple violations of federal securities laws. The lawsuit emphasizes the SEC’s position that some cryptocurrencies are “securities” and thus subject to federal regulations. The Binance case reveals the SEC’s approach to the crypto industry, comparing traditional securities industry functions with their crypto equivalents.

Binance Allegedly Avoided KYC Requirements and Encouraged VPN Use

Binance’s alleged avoidance of U.S. regulations is central to the lawsuit. The company is accused of manipulating its Know-Your-Customer (KYC) processes to hide its U.S. customer base and evade regulatory oversight. Out of Binance’s 62 million global customers, only 25 million had submitted KYC documentation.

Binance also allegedly encouraged U.S. customers to use virtual private networks (VPNs) to mask their locations and circumvent restrictions.

Implications Of Binance Connect Shutdown

Binance Connect Shocking Closure Amid Legal Chaos

The shutdown of Binance Connect and the legal troubles facing Binance have implications for the crypto industry as a whole. The shutdown of Binance Connect could reduce the availability of liquidity for cryptocurrencies, and the legal troubles facing Binance could cast a shadow over the entire crypto industry.

It is important to note that Binance is not the only crypto exchange that is facing legal scrutiny. Other crypto exchanges, such as Kraken and Coinbase, are also under investigation by the SEC and other regulators. The legal troubles  exchanges could have a chilling effect on the crypto industry, and could make it more difficult for new crypto exchanges to enter the market.

It is also important to note that the crypto industry is still in its early stages of development, and the regulatory landscape is still evolving. It is possible that the SEC and other regulators will eventually clarify their position on crypto exchanges and cryptocurrencies. However, until the regulatory landscape is clear, the crypto industry will continue to be vulnerable to legal challenges.

Overall, the shutdown of Binance Connect and the legal troubles facing Binance are a major development in the crypto industry. These developments could have a significant impact on the availability of liquidity for cryptocurrencies, the ease of use of crypto exchanges, and the confidence of investors in the crypto industry. It is important to stay up-to-date on these developments and to be aware of the risks associated with the crypto industry.

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