Cryptocurrencies have had a spectacular run since the creation of Bitcoin in 2009. Despite difficulties brought on by crypto winter and a wave of regulation, crypto and decentralized finance are here to stay. However, contrary to some of the hype along the way, crypto has not replaced traditional currencies and decentralized finance or DeFi has not replaced traditional finance or TradFi. Today we are seeing how DeFi needs TradFi in cases like Binance whose banking partners are backing away due to Binance’s regulatory and legal problems.
Binance Cut Off From TradFi
After US banks cut ties with Biance.US the company has had to look for other options to let their customers move funds in and out of their accounts. Bloomberg writes about how Binanace.US is trying to work with a crypto payment startup, MoonPay as a workaround. The problem for Binance is that their banking partners all cut their ties with the crypto company. Thus, for a month or more they have had no way for customers to put dollars into their crypto accounts or take assets out in dollars. What they are trying is a work-around in which people use debit or credit cards via MoonPay to purchase Tether stablecoins. Then they can purchase other tokens which can then be converted into dollars. This approach may work for Binance but it creates a lot more fuss and bother that Binance.US does not need as its customers are fleeing to exchanges with fewer “issues.”
Demise of Binance.US
The United States Securities and Exchange Commission sued Binance.US as well as its international parent company Binance.com. They allege a whole host of violations of securities laws. The issue will work its way through the court system. Meanwhile the world goes on and the $2 billion in customer crypto assets held by Binance.US prior to the lawsuit has virtually evaporated. Customers are fleeing and every single Binance.US banking partner has ceased their relationship with the company. It has gone from being a major player in the US to being an afterthought with Kraken and Coinbase now taking the lead.
Binance.US may or may not lose its lawsuit with the SEC. However, it has already lost even before the issues get their day in court. Crypto customers of Binance.US are not interested in the company’s legal troubles. They want their own trouble free methods to hold cryptocurrencies, buy or sell in the world of DeFi, and pursue their own business objectives. What they want is an unencumbered connection between decentralized finance and traditional finance in order to do business normally.
How Secure Is the Binance.US Work Around With MoonPay?
Despite being a bit cumbersome, it would appear that using MoonPay is a possible way for Binance.US to let its customers deposit into or withdraw from their accounts. Then the question is just how stable is MoonPay. The company got a lot of celebrity endorsements (Justin Bieber and Ashton Kutcher) last year. We are reminded of celebrities who promote crypto and the problems they can get themselves into. We see that MoonPay cut its internal valuation of its shares by 72% early this year!
If MoonPay ends up not being able to help Binance.US, the Binance affiliate in the US could go out of business even before its case with the SEC goes to court. Thus the SEC could potentially accomplish its purpose of eliminating the company as a regulatory issue without any formal legal action. Simply breaking the connection between DeFi and TradFi may have been enough to accomplish the SEC’s purpose.
SlideShare Version – How DeFi Needs TradFi
