Might Binance be at the risk of an ‘epic bank run’ after latest round of FUD
- Three U.S lawmakers have raised concerns about theft, money laundering, and terrorist financing within crypto-exchanges
- Binance may face an ‘epic bank run,’ claimed John Reed Stark, a former SEC attorney
Last week, three U.S lawmakers raised concerns that Binance, the world’s largest crypto-exchange, has reportedly facilitated theft, money laundering and terrorist financing. In response, Binance deflected but did not directly refute the lawmakers’ concerns.
Senators Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), and Roger Marshall (R-Kan.) requested financial information, including balance sheets since 2017. Also, any documents related to a reported 2018 plan to distract regulators with feigned interest in compliance. According to the Senators,
“What little information about Binance’s finances is available to the public suggests that the exchange is a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals and sanctions evaders.”
In fact, the Senators also compared Binance’s actions with those of crippled rival exchange FTX.
The letter was addressed to Binance CEO Changpeng Zhao and Brian Shroder, head of the American subsidiary Binance.US.
“We’re protecting our users, we’re protecting our customers, we’re doing everything that everyone preaches,” responded Zhao in a Twitter Spaces session held last week.
Additionally, according to a recent Forbes report, Binance, like FTX, transferred $1.8 billion in collateral to back customers’ stablecoins. In doing so, the exchange also distributed the funds to several large investors, Forbes added. Zhao, for his part however, refuted the claim.
At the time, an anonymous Binance.US spokesperson told Forbes that the company is confident in the strength of its operations. This, including compliance with anti-money laundering (AML) rules. Additionally, the company maintains 1:1 reserves and never trades or lends out customer funds, the spokesperson added.
Binance may face an ‘epic bank run’
Apprehensions about Binance’s operations aren’t limited to regulators and media outlets alone, however.
Binance may face an “epic bank run,” according to John Reed Stark, a former U.S Securities and Exchange Commission (SEC) attorney. Binance, according to Stark, is a “shadow bank” that mints its own counterfeit currency while offering a variety of financial services with no U.S regulatory oversight or audit.
Binance, Stark claimed, is not subject to the same regulations as traditional banks and does not hold deposits in the same manner. Customers would be cut off if withdrawals are suspended and they could become unsecured creditors, warned Stark.
Matt Senter, CTO of the Bitcoin rewards app Lolli, on the other hand, believes that Binance is unlikely to leave the United States.
“Binance would be forsaking its position as a leader in the crypto industry by leaving the U.S. and conceding an immense economic opportunity of reaching a capital-intensive American userbase.”
Though many believe Binance to be too big to fail, there are enough crypto-sceptics who do not put their trust in Binance — especially after the FTX debacle.
